The Dow and the Nasdaq are still well below their boom-time highs, but U.S. investors are feeling more upbeat than they have for over a year about prospects for the stock market and economy. That is the message from the latest Index of Investor Optimism, a nationwide consumer survey conducted by the Gallup Organization and UBS Americas Inc.

Based on a random monthly survey of 1,001 investors nationwide, the index hit 115 in January, up 31% from its level of 88 in December. While the reading is the highest for the index since November 2000, it remains below its starting point in the fall of 1996.

The survey highlighted a wide gap in expectations of stock-market returns between veteran equity investors and those who jumped in during the bull-market years. Investors with more than 20 years of experience said they expected 12-month equity returns to reach 7.8%, up from 6.8% in December, but still around what stocks have delivered, on average, since the 1920s. But investors who entered the market in the last five years said they expect returns to reach 11.7% in the coming year, up from 9.2% in December.

Investors cited a mix of defensive and growth sectors when asked which they believe will generate the best returns over the next six months. While 71% cited pharmaceuticals, a classic defensive play, 66% mentioned biotechnology and 52% technology. Retailing was the least-loved sector; only 22% saw it as attractive.

The survey was conducted from January 1 to 15 of consumers who are either a head of a household or a spouse in a household with total savings and investments of $10,000 or more. Gallup and UBS say the sampling error in the results is plus or minus three percentage points. The survey was recalibrated in January. The index was launched in October 1996; its initial reading, adjusted for the recalibration, was 124.

Detailed results of the survey can be found at