GALLUP NEWS SERVICE
PRINCETON, NJ -- Amid fears that the questionable accounting practices revealed by the Enron scandal are widespread in the business community as a whole, investor optimism is sharply lower this month. The UBS/Gallup Index of Investor Optimism is now at 92, down 23 points from last month, but still slightly above the level it reached shortly after the Sept. 11 terrorist attacks and maintained for the last quarter of the year. The Index had a baseline value of 124 when it was launched in October 1996. The monthly survey also finds that about nine in 10 investors have heard at least "a moderate amount" about the controversy surrounding the accounting practices at Enron, and more than six in 10 believe the accounting problems at Enron are widespread. Regardless of how many other companies might be having the same problems, eight in 10 investors feel that the issue of questionable accounting practices itself has hurt the U.S. investment climate.
U.S. Index of Investor Optimism October 1996 -- February 2002 |
The decline in the Index is due mostly to lower optimism about the investors' personal situations, the extent to which they will be able to meet their short-term and long-term investment targets, and also whether they will be able to maintain or increase their personal income. In all three areas, optimism is significantly lower this month than last, producing the largest one-month decline on the personal dimension since the Index was established.
The decline is also fueled by lower investor optimism about the stock market, down from 60% expressing optimism in January to 50% this month. In addition, investors' expectations for return on their personal portfolios declined from 10.2% last month to 9.5% in February. Still, expectations are higher now than they were for all of the last quarter of last year, when they averaged about 8.5%.
Concerns About Questionable Accounting Practices
Overall, 62% of investors say they have heard a great deal about the Enron scandal and questionable accounting practices, and another 27% have heard a moderate amount -- making this issue one of the most salient ever recorded by the Index.
Among all investors, 62% say the accounting problems are either very or somewhat widespread, while just 36% believe the problems involve only a few businesses. More significantly, 79% of investors say the controversy has hurt the investment climate in the United States.
In response to the uncertainty over the questionable accounting methods, investors are somewhat more likely to reduce their investments in stocks, and somewhat more likely to increase their holdings in cash or CDs, bonds, and real estate. Overall, 50% of investors say bonds are more promising than stocks, while 40% of investors take the opposite point of view.
Economy: The Worst Is Over
Despite concerns about the Enron scandal, questionable accounting practices and their effect on the stock market, investors express positive views about the future of the economy overall. Fifty-seven percent of investors say the recession has hit bottom, up from just 36% who held that view two months ago. And 71% of investors express confidence that the economy will be in a recovery within six months.
Survey Methods
The results reported here are based on telephone interviews with a randomly selected national sample of 1,001 adult investors, 18 years and older, with at least $10,000 of investable assets, conducted Feb. 1-17, 2002. For results based on this sample, one can say with 95 percent confidence that the maximum error attributable to sampling and other random effects is plus or minus 3 percentage points. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.
INVESTOR ATTITUDES : THE INDEX
OVERALL |
PERSONAL |
ECONOMIC |
|
02 February |
92 |
69 |
23 |
02 January |
115 |
85 |
30 |
01 December |
88 |
76 |
12 |
01 November |
84 |
78 |
6 |
01 October |
86 |
76 |
10 |
01 September |
50 |
61 |
-11 |
01 August |
76 |
73 |
3 |
01 July |
74 |
66 |
8 |
01 June |
85 |
76 |
9 |
01 May |
90 |
78 |
12 |
01 April |
81 |
75 |
6 |
01 March |
82 |
73 |
9 |
01 February |
77 |
73 |
4 |
01 January |
96 |
81 |
15 |
00 December |
106 |
86 |
20 |
00 November |
130 |
90 |
40 |
00 October |
132 |
88 |
44 |
00 September |
147 |
91 |
56 |
00 August |
160 |
100 |
60 |
00 July |
143 |
95 |
48 |
00 June |
149 |
101 |
48 |
00 May |
155 |
101 |
54 |
00 April |
140 |
93 |
47 |
00 March |
150 |
95 |
55 |
00 February |
168 |
97 |
71 |
00 January |
178 |
102 |
76 |
99 December |
174 |
102 |
72 |
99 November |
148 |
91 |
57 |
99 October |
139 |
91 |
48 |
99 September |
160 |
99 |
61 |
99 August |
149 |
96 |
53 |
99 July |
166 |
100 |
66 |
99 June |
146 |
87 |
59 |
99 May |
163 |
98 |
65 |
99 April |
168 |
100 |
68 |
99 March |
151 |
95 |
56 |
99 February |
167 |
97 |
70 |
98 December |
141 |
93 |
48 |
98 September |
147 |
90 |
57 |
98 June |
160 |
93 |
67 |
98 March |
161 |
93 |
68 |
97 December |
151 |
92 |
59 |
97 September |
151 |
91 |
60 |
97 June |
152 |
94 |
58 |
97 February |
128 |
87 |
41 |
96 November |
125 |
89 |
36 |
96 October |
124 |
85 |
39 |
How much have you heard in the news recently about the Enron bankruptcy and the questionable accounting practices that were part of that situation? Have you heard a great deal, a moderate amount, only a little, or not much at all?
A great deal |
A moderate amount |
Only a little |
Not much at all |
Don't know/ Refused |
|
02 Feb |
62% |
27 |
7 |
4 |
* |
* Less than 0.5% |
How widespread do you think the accounting problems associated with Enron's bankruptcy can be found in business as a whole 1) very widespread, 2) somewhat widespread, 3) limited to only a few companies, or 4) an isolated case?
Very widespread |
Somewhat widespread |
Limited to only a few companies |
An isolated case |
Don't know/ Refused |
|
02 Feb |
20% |
42 |
30 |
6 |
2 |
How much has the issue of questionable accounting problems affected your own views about investing? For each of the following, please indicate if this incident makes you more likely to put your money in that area, less likely, or whether this incident has had no effect. How about (read and rotate A-D)?
A. Stocks or stock mutual funds
More likely |
No effect |
Less likely |
Don't know/ Refused |
|
02 Feb |
15% |
49 |
34 |
2 |
B. Bonds or bond mutual funds
More likely |
No effect |
Less likely |
Don't know/ Refused |
|
02 Feb |
24% |
57 |
16 |
3 |
C. Cash, CDs, or money market funds
More likely |
No effect |
Less likely |
Don't know/ Refused |
|
02 Feb |
26% |
57 |
15 |
2 |
D. Real estate investments
More likely |
No effect |
Less likely |
Don't know/ Refused |
|
02 Feb |
26% |
58 |
15 |
1 |
Do you think that the issue of questionable accounting practices in business is hurting the investment climate in the United States, or not?
Yes |
No |
Don't know/ Refused |
|
02 Feb |
79% |
19 |
2 |