PRINCETON, NJ -- U.S. investor optimism declined in September, as the Wells Fargo/Gallup Investor and Retirement Optimism Index plunged to -45 from +33 in May after +42 in February. The index is now back at the financial crisis levels of late 2008.
The Wells Fargo/Gallup Investor and Retirement Optimism Index is a broad measure of investor perceptions that tends to be a precursor of future economic activity and is consistent with a future decline in the overall U.S. economy. It reached its record low of -64 in February 2009 -- just before the equity markets reached bottom in March 2009. The Index peaked at +178 in January 2000, just before the dot-com bubble burst.Investors Feel "Loss of Control"
Two in three investors (65%) say they feel little or no control in their efforts to build and maintain their retirement savings in the current environment while 22% say they have quite a lot of control and only 12% say they have a great deal of control. Forty-four percent say their control has decreased over the past six months.
Unemployment and a weak economy are most commonly cited as being a major factor in causing them to feel a loss of control over their investments, followed by extreme volatility on Wall Street. About three-quarters point to political factors including the "confrontational political stalemate in the nation's capital" and "a lack of national leadership." Fewer say Federal Reserve policies and the financial crisis in Europe made them feel a loss of control.
Jobs Hurting the Investment Climate
The poll also asked investors to evaluate factors hurting the investing climate, with the unemployment rate, the job growth rate, the federal budget deficit, and the politically divided federal government most often seen as hurting the investment climate "a lot."
Best Places to Put Your Money Include Gold and "Under the Mattress"
The plunge in optimism seems to have had an impact on investor perceptions. When asked what they think the best place is to keep their money right now, 26% of investors say stocks/mutual funds and 21% say savings accounts/CDs. However, another 20% point to gold and precious metals while 14% suggest the best place is to put your money "under the mattress" or hold it in cash. Another 8% point to real estate, while 7% indicate bonds.
Loss of Control Hurting the Economy
Ask money managers on Wall Street and most would probably say the European financial crisis is the thing that makes them feel a loss of control as they invest. Still, they would probably add that you can always make money in the markets if you know what you are doing.
For the average American investor, the situation is much different. It is difficult today for long-term investors to feel comfortable that their investments will grow in this investment environment. In this regard, it is not surprising that more than half of investors name something other than the stock market as the best place to put your money right now -- in savings accounts, CDs, gold/precious metals, or even "under the mattress." Maybe this also explains why only 35% of investors say now is a good time to invest in the financial markets compared with 53% in May.
While some of these feelings of a loss of control result from today's high unemployment and the volatility on Wall Street, investors tell us that the current political situation has exacerbated things. They point to the confrontational political stalemate in the nation's capital and to a lack of national leadership.
The Wells Fargo/Gallup Investor and Retirement Optimism Index results are based on questions asked on the Gallup Daily tracking survey of a random sample of 958 U.S. adults having investable assets of $10,000 or more from Sept. 1-11, 2011.
For results based on the total sample of investors, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.
Interviews are conducted with respondents on landline telephones and cellular phones, with interviews conducted in Spanish for respondents who are primarily Spanish-speaking. Each sample includes a minimum quota of 400 cell phone respondents and 600 landline respondents per 1,000 national adults, with additional minimum quotas among landline respondents for gender within region. Landline telephone numbers are chosen at random among listed telephone numbers. Cell phones numbers are selected using random digit dial methods. Landline respondents are chosen at random within each household on the basis of which member had the most recent birthday.
Samples are weighted by gender, age, race, Hispanic ethnicity, education, region, adults in the household, and phone status (cell phone-only/landline only/both, cell phone mostly, and having an unlisted landline number). Demographic weighting targets are based on the March 2010 Current Population Survey figures for the aged 18 and older non-institutionalized population living in U.S. telephone households. All reported margins of sampling error include the computed design effects for weighting and sample design.
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.
For more details on Gallup's polling methodology, visit http://www.gallup.com/.