U.S. Investor Optimism Rises Again, Hits 17-Year High

by Jim Norman

Story Highlights

• Index rises to +138, highest since +147 in September 2000
• Hike is latest in 98-point rise since February 2016
• 68% optimistic about stock market -- tied for highest percentage on record

WASHINGTON, D.C. -- A new surge of optimism among U.S. investors has pushed the Wells Fargo/Gallup Investor and Retirement Optimism Index to its highest level since September 2000. The index, after rising in every quarter since the start of 2016, leveled off in the second quarter at +124 before rising to its current +138 in the third quarter.

The latest boost in optimism pushes the index almost 100 points higher than the +40 score measured in February 2016. The 98-point hike over the past 18 months is the largest increase in the 20-year history of the index that is not a rebound immediately after a major drop in optimism.

The results come from a July 28-Aug. 6 Wells Fargo/Gallup Investor and Retirement Optimism Index survey of U.S. investors with $10,000 or more invested in stocks, bonds or mutual funds. The seven items that constitute the index include three on personal finances (meeting long-term investment goals, meeting short-term investment goals and maintaining income) and four on the economy (economic growth, the stock market, unemployment and inflation). The survey was in the field as the Dow Jones industrial average approached, then surpassed, the 22,000-point milestone for the first time.

Investors' Optimism About Stock Market Matches 1999-2000 Record High

One of the key factors in the robust third-quarter index is investors' growing confidence in the stock market.

• Sixty-eight percent now say they are optimistic about the stock market's performance during the next year, matching the record high for the question from December 1999 and January 2000.
• At least 61% have expressed optimism about the stock market in each of the three surveys this year, a percentage matched or exceeded only four other times in the 132 times the question has been asked since April 2000.
• Twenty-five percent say they are "very optimistic," topping the previous record high of 24% from the first quarter of this year. Only 11% were very optimistic a year ago.

Sixty-one percent of investors now say it is a good time to invest in the stock market, up from 53% two years ago. Among those saying it's a good time to invest, the main reason is their belief that the market will continue to increase, mentioned by 47%. Eighteen percent say stocks are a better investment than the alternatives, and 17% see stock market volatility as a buying opportunity.

Among the 37% who do not think it is a good time to put money into stocks, 52% say the main reason is worry about a market correction.

Retiree Investors More Optimistic Than Nonretirees

Optimism has risen considerably more among retired investors this year than among nonretired investors. In the first-quarter survey, the index was similar among retirees (+124) and nonretirees (+127). Now retirees are considerably more optimistic than nonretirees, +158 versus +130. While nonretirees' ratings of the personal and economic components have moved little this year, both have risen significantly for retirees.

Bottom Line

The stock market has moved generally upward for the past eight years after bottoming out in the wake of the 2008 economic crash, but investors have been slow to shed their skepticism about stocks as a good investment. This year's continued climb of the market to record-setting heights, however, has given investors enough evidence that more than two-thirds are optimistic and one-fourth are now very optimistic about its near-term performance.

As the Dow and other key economic measures have continued to move in a positive direction over the past few months, retiree investors have grown more optimistic about meeting their financial goals. With the financial status of retirees becoming more and more important as baby boomers flood the retirement rolls, the growing confidence of retiree investors provides a welcome piece of evidence about their financial well-being.

The question, as always, is whether the economy in general, and the stock market specifically, will continue to provide good reasons for optimism in the months ahead.