37% of investors say election results will have major impact on net worth
The Wells Fargo/Gallup Investor and Retirement Optimism Index increased
in November for the third straight quarter, bringing it to a nine-year
high. The index, which gauges investor optimism, now registers +96, up
from +79 in the third quarter. Among retired
investors, the optimism index improved 36 points to +117 while
increasing 11 points among non-retired investors to +89. The Wells
Fargo/Gallup Investor and Retirement Optimism Index fourth-quarter
survey was conducted by telephone with 1,012 U.S. investors November
16-20. The index last approached the current level in May 2007, prior to
the 2007-2009 recession, when it registered +95.
Bright outlook for 2017
Of the seven index components, investor optimism improved the most on
the 12-month outlook for economic growth. Fifty-seven percent of
investors, up from 45% in the third quarter, are now optimistic about
economic growth while only 27% are pessimistic, down from 35%.
Investors’ outlook for unemployment also improved in the fourth quarter,
with 52% optimistic, up from 47%. Fifty-four percent of investors are
now optimistic about the stock market. That is little changed from 51%
last quarter but sharply higher than in the first quarter of 2016 when
it was 32%.
“Rising investor optimism and the stock market reaching all-time highs
is great news to end the year on, but it isn’t necessarily driving
investors to put their money into the markets,” said Scott Wren,
senior global equity strategist for Wells Fargo Investment Institute.
“Investors are more interested in the markets, but it takes time for
this optimism to translate to flows into the stock
market, especially when investors have been cautious for so long,”
Wren added.
Investors cautiously optimistic following the election
The poll was conducted just over a week after the U.S. elections and the
Dow Jones Industrial average had experienced a better than 500-point
post-election surge, but before it crossed the 19,000 mark.
When thinking about the impact of this year’s presidential and
congressional elections, 46% of investors say the outcome of the
election makes them feel more optimistic about the U.S. economy over the
next 12 months, eclipsing the 38% who say it makes them feel less
optimistic. Another 15% say the election has had no effect on their
expectations for the economy.
“There’s a reason for the optimism as the U.S. economy is slowly
chugging along. Whether the markets are experiencing a post-election or
Santa Claus rally, investors should continue to focus on the
fundamentals, valuations, and where the economy and earnings are headed
over the next six to 12 months,” Wren said.
In line with investor optimism about economic growth, 57% of investors
say they feel positive about where the economy is heading into 2017,
while 38% say they are “bracing” themselves for an economic downturn.
Notably, there are strong political differences in these views, with
most investors who identify as Republican feeling positive about where
the economy is headed (79%) and most Democratic investors (68%) saying
they are bracing themselves for an economic downturn. Because more
investors identify as or lean Republican than Democratic — 53% vs. 40% —
the balance of investor expectations for economic growth in 2017 is
positive.
Investors believe election results will affect their net worth
Overall, 37% of investors — including 42% of retirees and 35% of
non-retirees — believe the election results will have a major impact on
their net worth. An additional 42% say it will have a minor impact,
while 19% say it will have no impact. Of all investors, half say the
election will have a positive impact on their net worth and 28% say a
negative impact.
Most investors expect market volatility
Nearly three-quarters of investors (74%) say the stock market will be
volatile in 2017, including one in five investors (21%) who expect the
stock market to be highly volatile, up slightly from 16% at this time
last year. Another 53% are expecting it to be somewhat volatile, while
just 23% of investors say it will not be too volatile.
When looking back on 2016, nearly six in 10 investors describe the stock
market as highly volatile (12%) or somewhat volatile (46%), while 39%
say it was not too volatile.
“Last year was not as volatile as some investors perceived it to be, and
we are not forecasting a lot of volatility in the U.S. markets for the
first half of the New Year. We encourage investors to think of
volatility in terms of what opportunities it may present,” Wren said.
Women more concerned about volatility than men
When asked about their reaction to the stock market volatility that has
occurred since the 2008-2009 market downturn, 44% of investors say
volatility still bothers them as much as before, 42% say they are better
at shrugging it off, and 11% say it doesn’t bother them.
Retirees and non-retirees have similar views of volatility, but there
are differences by gender. Men exhibit less concern, with 39% saying
volatility still bothers them and 46% saying they have gotten better at
shrugging it off, whereas 48% of women say volatility still bothers them
and 38% say they have gotten better at shrugging it off.
“Investors have a long memory when thinking about their portfolios
from the last economic downturn. It is important to remember that having
a long-term
investment plan can help investors navigate through the rough
patches of the markets,” said Wren.
Working investors expect income growth in 2017
The majority of working investors (57%) expect their wages or employment
income to increase in the coming year whereas just 5% foresee it
decreasing. More specifically, 7% predict their income will increase a
lot next year, 30% say it will increase a moderate amount, and 20% say a
little. In 2016, 62% of investors saw their income rise and 10% saw it
decrease. More investors expect their income to stay the same next year
(38%) than say it was steady in 2016 (28%).
Investors aged 18-49 are more likely than those 50+ to expect their
wages to increase in 2017 (65% vs. 47%), as well as to say their wages
did increase in 2016 (69% vs. 52%).
About the Wells Fargo/Gallup Investor and Retirement Optimism Index
These findings are part of the Wells Fargo/Gallup Investor and
Retirement Optimism Index, which was conducted Nov. 16-20, 2016, by
telephone. The Index includes 1,012 investors randomly selected from
across the country with a margin of sampling error of +/- four
percentage points. For this study, the American investor is defined as
an adult in a household with total savings and investments of $10,000 or
more. About two in five American households have at least $10,000 in
savings and investments. The sample size is comprised of 73%
non-retirees and 27% retirees. Of total respondents, 42% reported annual
income of less than $90,000; 58% reported $90,000 or more. The Wells
Fargo/Gallup Investor and Retirement Index is an enhanced version of
Gallup’s Index of Investor Optimism that provides its historical data.
The median age of the non-retired investor is 46 and the retiree is 70.
The Index had a baseline score of 124 when it was established in October
1996. It peaked at 178 in January 2000, at the height of the dot-com
boom, and hit a low of negative 64 in February 2009.
About Wells Fargo Investment Institute
Wells
Fargo Investment Institute (WFII) is a registered investment adviser
and wholly-owned subsidiary of Wells Fargo & Company, providing
investment research, strategy, manager research and thought leadership
within the Wealth and Investment Management (WIM) division, with the
goal of supplying world class advice to the company’s financial and
wealth advisers. WFII provides investment advice to Wells Fargo Bank,
N.A., Wells Fargo Advisors and other Wells Fargo affiliates.
About Wells Fargo & Company (Twitter @WellsFargo)
Wells Fargo & Company (NYSE:WFC) is a diversified, community-based
financial services company with $1.9 trillion in assets. Founded in 1852
and headquartered in San Francisco, Wells Fargo provides banking,
insurance, investments, mortgage, and consumer and commercial finance
through more than 8,600 locations, 13,000 ATMs, the internet
(wellsfargo.com) and mobile banking, and has offices in 42 countries and
territories to support customers who conduct business in the global
economy. With approximately 269,000 team members, Wells Fargo serves one
in three households in the United States. Wells Fargo & Company was
ranked No. 27 on Fortune’s 2016 rankings of America’s largest
corporations. Wells Fargo’s vision is to satisfy our customers’
financial needs and help them succeed financially. 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.
