The Wells Fargo/Gallup Investor and Retirement Optimism Index showed little improvement in August despite the market rally. The index score registered 18 among U.S. adults with $10,000 or more invested in stocks, bonds or mutual funds, up from a score of 4 in the second quarter, following a sharp drop from the 20-year high of 138 in the first quarter.
“Despite the gains in the markets, investor optimism remains fragile as unemployment remains high and further stimulus is in question,” said Tracie McMillion, head of asset allocation strategy for Wells Fargo Investment Institute (WFII). “While we expect economic growth to resume this year, consumers continue to exercise caution on spending.”
The economy continues to weigh on investors’ outlook, with more saying they are pessimistic (47%) about economic growth over the next 12 months than optimistic (40%). Investors’ evaluation of current economic conditions is also grim.
About three-quarters describe current conditions as “shaky” (49%) or “weak” (25%). Just 27% describe them as “solid” (24%) or “booming” (3%).
In fact, most investors believe economic downturn is ahead, dismissing talks of V-shaped recovery. Two-thirds of investors believe the road to recovery will be far from smooth, and 40% of investors believe the economy will have multiple downturns before a recovery will take place.
Another 23% believe the economy will have at least one other significant downturn before recovering — a so-called W-shaped recovery. Only 37% of investors expect the economy to steadily improve from the low point experienced in April — a V-shaped recovery that economists consider to be a best-case scenario.
Economy is leading factor for investors this election
Looking ahead to the presidential election, the economy is top of mind for investors among 10 issues the poll tested as potentially influencing their votes. About seven in 10 say the candidates’ positions on the economy (69%) are very important in deciding how they will vote. Healthcare (59%), education (58%), and the coronavirus (57%) vie for second.
About half of investors rate taxes (51%), racial justice (51%), and immigration (50%) as very important, but far fewer assign the same level of importance to U.S. policy toward China (39%), climate change (37%), or the federal budget deficit (36%).
However, despite the importance of the economy to investors’ votes this November, most continue to believe the nation should prioritize reducing the number of COVID-19 deaths (60%) over opening the economy and getting people back to work as soon as possible (40%).
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