PRINCETON, NJ -- Consistent with the 15% improvement in the equity markets during the third quarter, the Â鶹´«Ã½AV Index of Investor Optimism -- a broad measure of investor perceptions -- hit a new 2009 high of 14 in a Sept. 28-30 poll. This is the second month in a row that the Index has been positive, indicating that investors as a whole are optimistic after nine consecutive months of pessimism. Still, September's improvement represents only a five-point increase from August and reflects continued investor pessimism in the Economic Dimension of the Index.
Portfolio Optimism at New High for the Year
For the third 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 to 36 in September from 31 in August, accounting for all of the increase in the overall Index. Once again in September, investors appear to be more optimistic about the future performance of their portfolios over the next 12 months than they have been at any time this year. Personal portfolio optimism is up 15 points over the past three months, as investors clearly enjoyed the third-quarter surge in the stock market.
Economic Pessimism Unchanged
In sharp contrast to investors' optimism about their personal portfolios is their overall pessimism about the future direction of the U.S. economy: the Economic Dimension of the Index remained unchanged at -22 in September. (A negative score means investors as a whole remain pessimistic along this dimension.) Still, this is a sharp 20-point improvement from June's -42 score. Investors have not been positive about the economy's direction at any time measured since the recession began in December 2007.
Commentary
The modest increase in the Index of Investor Optimism for September is fully consistent with a similar improvement in Â鶹´«Ã½AV's Consumer Confidence Index. In fact, consumers and investors are surprisingly similar in .
The government reported a rise Friday in the U.S. unemployment rate to 9.8% for September, an increase that is also consistent with this continued economic pessimism on the part of average investors and consumers. While there is an inventory-driven recovery that is showing up in the overall economic statistics, , this has not resulted in an improving job market but in one that continues to deteriorate, albeit more slowly.
As long as jobs continue to disappear, consumer spending is likely to continue to lag. Although it is far from certain, investors may be right that their investment portfolios can continue to improve even as the U.S. economy struggles -- particularly if the value of the dollar continues to decline. More certain is that they are also correct to maintain their skepticism about the future direction of the overall economy in the months ahead, at least going by the mood on Main Street.
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 Sept. 28-30, 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 point.
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.
