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U.S. Investor Optimism Slips to Two-Year Low This Quarter

U.S. Investor Optimism Slips to Two-Year Low This Quarter

Chart: data points are described in article

Story Highlights

  • Investor index still positive, but down from last quarter
  • Decline in outlook for stock market mostly to blame
  • Four in 10 think market volatility is the new normal

PRINCETON, N.J. -- The Wells Fargo/Gallup Investor and Retirement Optimism Index fell to +40 this quarter from +59 in the fourth quarter of 2015. While still positive, the index is 30 points below the post-recession high of +70 recorded last May, and is the lowest it has been since July 2014.

Wells Fargo/Gallup Investor and Retirement Optimism Index

Of the seven items that make up the index, investors' outlook on the stock market soured the most this quarter. The percentage optimistic about the 12-month outlook for the market fell from 45% to 32%, while the percentage pessimistic increased from 30% to 45%. As a result, net optimism in the stock market shifted from +15 in the fourth quarter of 2015 to -13 this quarter.

Accordingly, investors also lost some hope about their personal investments in the near term, with net optimism for reaching their 12-month investment targets slipping 13 points to +15.

Components of Investor Optimism Index -- Recent Changes in Net Optimism
2015 Q4 2016 Q1 Change
Meeting five-year investment goals +40 +47 +7
Inflation -5 -2 +3
Maintaining income +45 +43 -2
Unemployment +12 +10 -2
Economic growth +11 0 -11
Meeting 12-month investment targets +28 +15 -13
Stock market +15 -13 -28
Wells Fargo/Gallup Investor and Retirement Optimism Index

Investors' net optimism about economic growth is down 11 points to a neutral reading of zero, while the poll found a modest increase in investors' mostly positive outlook for meeting their five-year investment goals. The outlook for inflation is a net of -2, but also essentially flat compared with last quarter.

These findings are from the latest Wells Fargo/Gallup Investor and Retirement Optimism Index survey, conducted Jan. 29-Feb. 7, 2016, among 1,012 U.S. investors. Approximately 40% of U.S. adults meet the survey's criteria as investors, which are having $10,000 or more invested in stocks, bonds or mutual funds, either in an investment or retirement account.

Investor Concern About Stock Market Holds Steady

The poll was conducted as the stock market was recovering slightly from the significant market downturn in January and only a few months after a similar decline in August. Despite this, just 20% of investors in the new poll describe themselves as very concerned about recent stock market volatility, essentially unchanged from the 18% saying this in November. However, this is up from 14% a year ago. The combined percentage of very or somewhat concerned investors is now 64%, similar to the 62% last fall but up from 53% a year ago.

How concerned are you about the recent volatility in the stock market?
Very concerned% Somewhat concerned% Not too concerned% Not at all concerned% Don't know/ Refused%
February 2016 20 44 26 9 1
November 2015 18 44 28 10 *
February 2015 14 39 33 13 1
Base: total investors n=1,002; * Less than 0.5%
Wells Fargo/Gallup Investor and Retirement Optimism Index

This lack of high concern is reflected in the finding that investors didn't rush to act during the market volatility in January. Just 4% say they sold stocks as a result of the volatility, while 11% say they purchased new stocks. The vast majority -- 81% -- say they rode it out, making no changes.

Investors are closely split on whether stock market volatility will become "the new, normal pattern in the years ahead," or if it instead represents "a temporary pattern." At the moment, the edge goes to those calling it temporary (54%). Forty percent consider it the new normal.

Bottom Line

After the market downturn this quarter, investors' optimism about the outlook for the stock market over the next year shifted from slightly positive to slightly negative. This, along with smaller declines in investors' outlook for their portfolios and the economy, helped push the Investor and Retirement Optimism Index lower. Still, at +40, the index remains in solid positive territory. And though many investors see market volatility as the new normal, most are not highly concerned about the latest example of this volatility.

Survey Methods

Results for the Wells Fargo/Gallup Investor and Retirement Optimism Index survey are based on questions asked Jan. 29-Feb. 7, 2016, on the Gallup Daily tracking survey, of a random sample of 1,012 U.S. adults having investable assets of $10,000 or more.

For results based on the total sample of investors, the margin of sampling error is ±4 percentage points at the 95% confidence level. All reported margins of sampling error include computed design effects for weighting.

Each sample of national adults includes a minimum quota of 60% cellphone respondents and 40% landline respondents, with additional minimum quotas by time zone within region. Landline and cellular telephone numbers are selected using random-digit-dial methods.

Learn more about how the Wells Fargo/Gallup Investor and Retirement Optimism Index works.

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