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Retail Investor Optimism Index Hits Seven-Year High

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Market top sign?

A December 17th article from polling and demographic research firm Gallup highlights that optimism about investing and retirement among Americans continues to improve. Of note, this survey was taken before the recent pre-Christmas stock market swoon.

The 4Q 2014 Wells Fargo/Gallup Retirement and Investor Optimism Index uses data from a nationally representative telephone survey of 1,009 U.S. adults with $10,000 or more in investable assets, conducted Nov. 14th through 23rd. Of note, close to 40% of American households have at least $10,000 in savings and investments.

Overview of 4Q US Investor Optimism Index

American investors’ mood has been relatively positive throughout the fourth quarter, with the Wells Fargo/Gallup Retirement and Investor Optimism Index hitting +48 in mid-November, quite close to the +46 reading achieved in August.

Investor Optimism Index

Although these recent mid-double-digit totals are still far from the +178 peak recorded in early 2000, the index is notably improved from -64 in 2009 and +25 a year ago. The November reading of +48 also represents a seven-year high.

Details on Fourth Quarter Gallup Investor Optimism Index

The Investor Optimism Index has two components: economic and personal. The economic dimension was notably this quarter, hitting positive territory as it rose to +5 from -1. The personal dimension slipped a bit but was still positive at +43 versus +47 in August.

Investor Optimism Index

Investor Optimism Index

The economic dimension represents investors’ expectations regarding the performance of four aspects of the economy over the next 12 months. Investors were the most positive about the stock market, with a net optimism score of +31, close to the +29 reading last quarter. The Gallup index also noted positive net optimism concerning economic growth, with the +4 number up from -1 last quarter. Investors’ ratings of unemployment  at -3 and inflation at -14 are both lower but up slightly from August.

Investor optimism has shown some improvement on all dimensions year over year, except for the stock market, which has close to the same positive today as it did 12 months ago.

Investor Optimism Index

Of interest, after trailing non-retirees last quarter, the level of optimism among retired investors was up a robust 19 points in November to +54, moving past non-retired investors’ optimism, which slipped a bit to +46. This is only the third occasion over three years that retirees’ optimism has topped non-retirees’.

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