Half of investors think the economy is “solid;” 39% describe it as “shaky” or “weak”
Nearly half of investors say incomes have not kept up with inflation
Investor optimism holds steady in fourth quarter
ST. LOUIS--(BUSINESS WIRE)--U.S. investors are not supportive of further interest rate hikes, with a
majority surveyed by Wells Fargo – 61 percent – saying the Federal
Reserve should not continue to raise rates, up from 46 percent surveyed
in May. Nearly half of those investors – 48 percent – say that raising
rates would be “bad” for the economy, outweighing 16 percent who say
rate hikes would be beneficial. Thirty seven percent say raising rates
“won’t make much of a difference” for the economy.
In addition, 47 percent of surveyed investors say their income has not
kept up with the rate of inflation over the past four years.
The latest findings come from the fourth quarter Wells Fargo Investor
and Retirement Optimism Index survey, conducted Nov. 12-20. The survey
is based on 1,022 U.S. adults with $10,000 or more invested in stocks,
bonds or mutual funds.
The Wells Fargo Investment Institute expects a rate hike at the upcoming
FOMC meeting that concludes on Dec. 19. ”Our current outlook is for
three additional rate hikes over next year before the Fed ends its
current rate hike cycle,” said Brian
Rehling, co-head of global fixed income strategy for the Institute.
Economy Described as “Solid” and Living Up to Reports
Only 11% of investors in the fourth-quarter poll describe the current
U.S. economy as “booming,” but another 50 percent consider it “solid.”
Despite this positive assessment, a significant minority, 39 percent,
use the words “shaky” or “weak.”
Separately the poll finds more than six in 10 investors perceiving the
economy to be about as strong as it has been reported to be (40 percent)
or stronger than reported (23 percent). Meanwhile, 37 percent say the
economy is “not as strong” as reported.
The Wells
Fargo Investment Institute does not foresee a recession next year,
though risks increase beyond 2019.
The Wells
Fargo Investor and Retirement Optimism Index, which is a
consumer-based barometer of how investors view the investing climate,
didn’t budge in the fourth quarter, coming in at 98, the same level as
in the third quarter. The index has hovered near 100 for most of the
past two years, following a 16-year period when it was consistently
below that level.
Will the Fed Make the Right Decision on Rates?
A slight majority of surveyed investors, 53 percent, say they have faith
in the Federal Reserve to make the right decisions on interest
rates. This includes 8 percent who have a “lot of confidence” in the
Fed and 45 percent who have a “fair” amount of confidence. At the same
time, close to half – 47 percent - have only “a little” (38 percent) or
“no trust” (9 percent) in the Fed’s decision-making on interest rates.
Inflation Anxiety on the Horizon
As much as investors oppose further interest rate hikes, inflation could
be an even bigger stressor for investors.
Seventy percent are concerned that inflation could go “a lot higher”
versus 30 percent who are more worried that interest rates could go “a
lot higher.” While the vast majority of retired and non-retired
investors see inflation as the greater risk, retired
investors (75 percent) are a bit more likely than non-retired
investors (67 percent) to be wary of inflation.
More than eight in 10 of the investors surveyed believe a potential
trade war with China will increase prices and likely raise inflation in
the U.S., including 47 percent who consider this “very likely” and 37
percent “somewhat likely.” Just 16 percent say it is unlikely that a
trade war with China would force U.S. prices higher.
“Investors would likely cheer news of a solid and definitive U.S. trade
agreement with China. Continued tensions in the U.S.-China trade dynamic
could further exacerbate uncertainty in U.S. financial markets,” said
Rehling.
The poll, conducted prior to the G-20 meeting and negotiations between
U.S. President Donald Trump and Chinese President Xi Jinping on trade
that ended Dec. 1, found that a slight majority of investors, 53
percent, feel worried about a U.S.-China trade war versus 47 percent who
are not worried.
As investors grapple with concerns on inflation and trade, only 16
percent state that they’re “very concerned” about the recent sharp
volatility in the markets. A strong majority of investors – 68 percent –
say that they’re comfortable riding out a 500-point drop in the stock
market in a single day and therefore maintaining their equity positions.
Most Investors Expect to Live Past 80
Investors surveyed expect to live to a median age of 85, with 47 percent
saying they will live between the ages of 86 to perhaps 96 or longer.
Nine percent say they will live past age 96.
According to the survey, 52 percent say they would be willing to take
“only a little risk” or “no risk at all” to generate higher returns on
their investments. Forty-eight percent would be willing to take “a lot”
or “a fair amount of risk.” Of the 47 percent of investors who see
themselves living past 86, 51 percent say they would be inclined to take
risk to potentially generate higher returns.
Asked how likely it is they could remain “financially comfortable” if
they live to 100, just 15 percent of investors say it’s “very likely,”
and another 40 percent say “likely.” Forty-four percent, say maintaining
financial comfort is “not likely.”
“With lengthening lifespans in the modern age, and low yields in savings
accounts, a question for investors is ‘how much risk are they willing to
take to generate return?’ especially if they are going to live into
their 90s. We see essentially a split among investors, with a little
less than half willing to take on risk to generate return,” said Rehling.
About the Wells Fargo/Gallup Investor and Retirement Optimism Index
The results of this Wells Fargo/Gallup Investor and Retirement Optimism
Index are based on a Gallup Panel web study completed by 1,022 U.S.
investors, aged 18 and older, from Nov. 12 to 20, 2018. The Gallup Panel
is a probability-based longitudinal panel of U.S. adults who Gallup
selects using random-digit-dial phone interviews that cover landline and
cellphones. Gallup also uses address-based sampling methods to recruit
Panel members. The Gallup Panel is not an opt-in panel. The sample for
this study was weighted to be demographically representative of the U.S.
adult population, using the most recent Current Population Survey
figures. For results based on this sample, one can say that the maximum
margin of sampling error is ±5.5 percentage points at the 95% confidence
level. Margins of error are higher for subsamples. In addition to
sampling error, question wording and practical difficulties in
conducting surveys can introduce error and bias into the findings of
public opinion polls.
For this study, the American investor is defined as an adult in a
household with stocks, bonds or mutual funds of $10,000 or more, either
in an investment account or in a self-directed IRA or 401(k) retirement
account. About two in five U.S. households have at least $10,000 in such
investments. The sample consists of 67% nonretirees and 33% retirees. Of
total respondents, 39% reported annual incomes of less than $90,000; 61%
reported $90,000 or more. The Wells Fargo/Gallup Investor and Retirement
Index is an enhanced version of Gallup’s Index of Investor Optimism,
which provides the historical trend data. The median age of the
non-retired investor is 49 and the retiree is 68.
The Index of Investor Optimism has an adjusted baseline score of 100
from when it was established in October 1996. It peaked at +152 in
January 2000, at the height of the dot-com boom, and hit a low of -81 in
February 2009.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based
financial services company with $1.9 trillion in assets. Wells Fargo’s
vision is to satisfy our customers’ financial needs and help them
succeed financially. Founded in 1852 and headquartered in San Francisco,
Wells Fargo provides banking, investments, mortgage, and consumer and
commercial finance through 8,050 locations, 13,000 ATMs, the internet
(wellsfargo.com) and mobile banking, and has offices in 38 countries and
territories to support customers who conduct business in the global
economy. With approximately 265,000 team members, Wells Fargo serves one
in three households in the United States. Wells Fargo & Company was
ranked No. 26 on Fortune’s 2018 rankings of America’s largest
corporations. News, insights and perspectives from Wells Fargo are also
available at Wells
Fargo Stories.
About Gallup
Gallup delivers analytics and advice to help leaders and organizations
solve their most pressing problems. Combining more
than 80 years of experience with its global reach, Gallup knows more
about the attitudes and behaviors of employees, customers, students and
citizens than any other organization in the world.
General Disclosures
Wells Fargo Investment Institute, Inc. (“WFII”) is a registered
investment adviser and wholly owned subsidiary of Wells Fargo Bank,
N.A., a bank affiliate of Wells Fargo & Company.
The information in this report represents opinions as of the date of
this report and are for general information purposes only and are not
intended to predict or guarantee the future performance of any
individual security, market sector or the markets generally. WFII does
not undertake to advise you of any change in its opinions or the
information contained in this report. Wells Fargo & Company affiliates
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