- The Washington Times - Monday, February 24, 2003

NEW YORK, Feb. 24 (UPI) — UBS and the Gallup Organization said Monday overall investor optimism in the United States fell to an all-time low in February, as investors expressed heightened concerns about the state of the nation's economy and the effects of a possible war with Iraq.

UBS and Gallup said the U.S. index of investor optimism, which had a baseline of 124 when it was established in 1996, plunged 29 points to nine from 38 in January.

The report showed that in February, just 35 percent of those surveyed said they are optimistic about the prospects for economic growth over the next 12 months, the lowest level in the survey's history, and down from 42 percent in January.

The report also showed only 30 percent of the investors polled express optimism about the performance of the financial markets in the short term, compared with 51 percent who said they were pessimistic.

UBS and Gallup said less than half of those surveyed, or 42 percent, said now is a good time to invest in the markets, also a record low.

The report showed expectations for short-term return, over the next 12 months, held steady at 6.7 percent in February.

Younger investors, those under age 40, continue to anticipate higher returns for their portfolio over the next year. Expected rates of return among this group averaged 9.1 percent, compared with 6.1 percent among older investors, or those over age 40.

UBS and Gallup said despite a gloomy overall outlook, a majority of investors, or 60 percent, said they are still more optimistic about the U.S. markets than other regional financial markets.

European markets ranked a distant second with 12 percent; Japan followed with 11 percent; and countries referred to as emerging markets were favored by only 10 percent of investors.

When asked about possible events that may negatively impact the investment climate, a war with Iraq ranked as the top concern, with 37 percent of those surveyed saying it poses a major threat.

A prolonged economic downturn was cited by 22 percent; major terrorist attacks were named by 22 percent; significant depreciation of the U.S. dollar was cited by 9 percent; and conflict with North Korea was the largest concern for 6 percent of investors.

UBS and Gallup said more than half of those surveyed, or 56 percent, believe that if the U.S. does invade Iraq, there will be a negative effect on the nation's economy. This is compared with 35 percent who said war with Iraq with have a positive economic impact, and only 7 percent who believe it will have no effect at all.

Dennis J. Jacobe, research director for Gallup, said the sampling for the poll included 1,000 investors randomly selected from across the country. For this study, the American investor is defined as any person who is head of a household or a spouse in any household with total savings and investments of $10,000 or more. Nearly 40 percent of American households have at least this amount of savings and investments.

The sampling error in the results is plus or minus three percentage points.

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