Investors are more optimistic about their ability to maintain incomes over the next year with the Wells Fargo/Gallup Investor and Retirement Optimism Index rising to +43, and reaching the highest level in two and a half years.
The Wells Fargo/Gallup Investor and Retirement Optimism Index surged by 12 points since March and optimism seemed especially high among non-retired investors at +45. Optimism also increased among retired investors, up 25 points since March to +32.
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Approximately 54% of investors said now is a good time to invest in the financial markets, up from 51% in March and 39% in November 2012, according to the Index. Still, in a separate question, 62% of investors anticipated a market correction that would take back significant market gains later this year. Despite that expectation, only 16% of those who expected a correction say they shifted into safer investments, while 80% made no changes to their portfolio’s composition.
The Wells Fargo/Gallup Investor and Retirement Optimism Index, conducted quarterly, is a broad measure of investor perceptions that tends to be a precursor of economic activity. The current survey, conducted May 16-27, included a random sample of 1,426 investors.
Investor worries
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By GlobalDataInvestors are most likely, on a list of 10 specific issues, to say the greatest challenge they are facing is "a politically divided federal government," with 73% saying it is hurting the current investment climate "a lot." This item has been near or at the top of investors’ concerns since September 2011.
The federal budget deficit is investors’ second-greatest concern, with 67% saying it is hurting the investment climate a lot; this has been near the top of investors’ worries over the past 2 1/2 years. Unemployment is investors’ third-highest concern, with 55% saying it is hurting the investment environment a lot — little different from the 53% of March, but well below its September 2011 peak of 83%.
Investment roadblocks
Investors said the top three conditions "hurting" the investment climate "a lot" are a politically divided federal government (73%), followed by the deficit (67%) and unemployment (55%).
Almost three-quarters (73%) of investors believe they will pay higher federal taxes in retirement and 90% say this will make it more difficult for them to live comfortably in retirement. Sixty percent of investors are either "somewhat worried" to "extremely worried" that their federal taxes will increase over the next 12 months and yet a minority – 38% -have put money in a Roth IRA.
