Investors are increasingly optimistic about the stock market in the wake of continued good news about economic and corporate-earnings growth in the second half of this year.
The Wells Fargo/Gallup Investor and Retirement Optimism Index increased in November for the third straight quarter, a nine-year high.
Among retired investors, the optimism index improved 36 points to 117 while increasing 11 points among non-retired investors to 89. It scored a combined 95 among those two groups in early 2007, before the Great Recession of 2007-09 cut the stock market value in half.
Of the seven index components, investor optimism rose most on the 12-month outlook for economic growth. Fifty-seven percent of investors, up from 45 percent in the third quarter, are now optimistic about economic growth while only 27 percent are pessimistic.
“Rising investor optimism and the stock market reaching all-time highs is great news to end the year, but it isn’t necessarily driving investors to put their money into the markets,” Scott Wren, senior global equity strategist for the Wells Fargo Investment Institute, said a few days ago. “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.”
The poll was conducted a week after President-elect Donald Trump's election. The Dow Jones Industrial average had experienced a 500-point-plus surge. It now is nearing 20,000, which would be another 2016 record. It should be noted that market downdrafts are often associated with the peak of optimism. The S&P 500, reflecting stock prices of America’s 500-largest companies, is up about 13 percent this year. The index has risen 200 percent-plus since 2009, not including dividends of around 2 percent per year.
In line with investor optimism, 57 percent of investors say they feel positive about where the economy is heading into 2017. About 38 percent say they are “bracing” themselves for an economic downturn. differences in these views. Most investors, 79 percent, who identify as Republican feel positive about the economy. Two thirds of Democratic investors say they are bracing themselves for an economic downturn. Because more investors identify as or lean Republican¬-53 percent vs. 40 percent-investor expectations skew positive.
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.