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Tags: Investor | Optimism | Recession | Fears

Wells Fargo Survey: Investor Optimism Falls Amid Recession Fears and Looming ‘Fiscal Cliff’

By    |   Thursday, 02 August 2012 07:06 AM

Investor optimism fell in July from May, driven by increased fears of a spending slowdown, a recession in 2013 and falling off the so-called fiscal cliff, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index.

Specifically, the index fell to +16 in July from +24 in May and +40 in February. The Index was started in 1996 with a baseline score of +124, and it peaked at +178 in January 2000 and hit a low of -64 in February 2009.

The survey, which was conducted from June 30 to July 11, included responses from 1,020 investors, defined as any person who is head of a household or a spouse in any household with total savings and investments of at least $10,000. In all, 74 percent of the respondents were not retired, and 26 percent were retired.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

The nonretirees had the greatest decline in optimism, down 10 points from May, while the retirees’ optimism remained flat.

In addition, 41 percent of all respondents say now is a good time to invest in the markets, down from 48 percent in May and 52 percent in February.

The threat of falling off the fiscal cliff is worrying investors, as 54 percent say they are paying a “great deal” or “quite a lot” of attention to the issue. In addition, 61 percent believe the U.S. economy will enter into a recession next year if the fiscal cliff is not addressed, and 71 percent say the U.S. economy will slow in the second half of this year because “concern” about the fiscal cliff will result in lower spending and investing by consumers and businesses.

Regarding the November elections, approximately 75 percent believe the presidential and congressional elections will impact their net worth, while 23 percent say the election will have no impact.

Three-fourths also say the president, Congress and the private business sector are all responsible for fixing the U.S. economy.

A “politically divided federal government” was rated as the top factor affecting the investing climate, as rated by 69 percent of the respondents. The divided government was also a factor affecting the unemployment rate (67 percent) and the federal budget deficit (67 percent).

As compared with four years ago, 37 percent of investors say they are better off financially now, while 33 percent say they are worse off. Moreover, 78 percent say their household income has either increased or held steady. However, only 24 percent are saving more than they were prior to the recession, while 43 percent are saving less.

Of the nonretirees, 50 percent report they have “guessed” at the savings they will need during retirement, while 48 percent say they have made a more careful calculation.

Among the nonretirees, 24 percent say Social Security will be a major funding source for their retirement, 69 percent say their 401(k) will be a major source and 32 percent say pensions will be a major source of funding. The respective proportions among the retired respondents are 52 percent, 27 percent and 49 percent.

In addition, 35 percent of the nonretirees call stock investments a “major source” of retirement funding compared with 27 percent of the retirees.

Of the nonretired investors, 80 percent say they have some sort of an emergency fund, with approximately a third saying their emergency fund would provide them with three months or less of expenses and 45 percent saying it would last them less than a year.

This percentage is much higher than the average American.

According to Bankrate.com's Financial Security Index survey, nearly half of Americans don't have enough money saved to cover emergencies, and one-quarter don't have any money saved,

The general rule of thumb is to have enough cash saved to cover at least six months of expenses.

However, only 25 percent of Americans have saved that amount and 17 percent have three to five months' expenses saved, while 28 percent have no emergency savings and 21 percent have less than three months' expenses saved.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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Thursday, 02 August 2012 07:06 AM
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