PRINCETON, NJ -- Consistent with Â鶹´«Ã½AV's Consumer Confidence measure and the continued strong performance of the equity market, the Â鶹´«Ã½AV Index of Investor Optimism -- a broad measure of investor perceptions -- in August hit a new 2009 high of 9. This represents a 12-point increase from July and is the first time the Index has been positive since June 2008. The Index has improved by 73 points from February's -64 reading -- its lowest level since its inception in October 1996.
Portfolio Optimism at New High for the Year
For the second month in a row, average American investors have become more optimistic about the prospects for their personal portfolios. The Personal Dimension of the Index increased by 3 points to 31 in August and is up 10 points since June -- suggesting that investors are more optimistic about the performance of their portfolios over the next 12 months than they have been all year. Personal portfolio optimism is up 25 points from its historical low of 6 in February.
Economic Pessimism Diminishes
Investors are less pessimistic in August about the future direction of the U.S. economy, with the Economic Dimension of the Index improving another 9 points to -22 (a negative score means investors as a whole remain pessimistic along this dimension). This is a sharp 20-point improvement from June, when this dimension was at -42, and is much better than February's historical low of -70. Investors have not been positive about the economy's direction at any time measured since the recession began in December 2007.
Commentary
It is significant that average American investors as a whole turned optimistic in August. The Index first turned negative and investors pessimistic about the U.S. economy in April 2008, and the Index has remained negative consistently since November 2008. The Index's movement into positive territory in August tends to reinforce Â鶹´«Ã½AV's Consumer Confidence findings that . It also aligns with the recent Conference Board report indicating that consumer confidence increased in August, and with the late-month increase in consumer sentiment that Reuters/University of Michigan reported Friday morning -- evidently a surprise to many economic observers.
The problem is that even as Wall Street surprises to the upside and consumer confidence improves, neither the jobs market nor consumer spending shows similar signs of improvement. Is it possible that the U.S. economy can recover and Wall Street continue to surge without the consumer? That question is yet to be answered -- but history suggests it is unlikely.
Author's Note: Â鶹´«Ã½AV's Index of Investor Optimism -- a survey of those having $10,000 or more of investable assets -- peaked at 178 in January 2000, just prior to the bursting of the dot-com bubble. Last year, the Index turned negative for the first time in its history. Before last year, the low for the Index was 5 in March 2003, reflecting investor concerns at the outset of the Iraq war.
Survey Methods
Â鶹´«Ã½AV Poll Daily interviewing includes no fewer than 1,000 U.S. adults nationwide each day during 2008. The Index of Investor Optimism results are based on questions asked of 1,000 or more investors over a three-day period each month, conducted Aug. 18-21, July 24-26, June 25-27, May 26-28, April 21-23, March 16-18, Feb. 17-19, and Jan. 16-18, 2009; and Dec. 16-18, Nov. 24-26, June 3-6, April 25-28, March 28-31, and Feb. 28-March 2, 2008. For results based on these samples, the maximum margin of sampling error is ±3 percentage points.
Results for May 2008 are based on the Â鶹´«Ã½AV Panel study and are based on telephone interviews with 576 national adults, aged 18 and older, conducted May 19-21, 2008. Â鶹´«Ã½AV Panel members are recruited through random selection methods. The panel is weighted so that it is demographically representative of the U.S. adult population. For results based on this sample, one can say with 95% confidence that the maximum margin of sampling error is ±5 percentage points.
For investor results prior to 2008, telephone interviews were conducted with at least 800 investors, aged 18 and older, and having at least $10,000 of investable assets. For the total sample of investors in these surveys, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.
Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).
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.
