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Advisor Gloom Matches Clients' Pessimism

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The market volatility of August 2007 prompted by the subprime mortgage crisis predictably led to major decreases in optimism among investors and their advisors, two new surveys show.

The Rydex AdvisorBenchmarking Advisor Confidence Index (ACI) dropped 4.73% in August, Rydex announced August 27, as all four elements in the index fell. Advisors were most negative, the survey showed, about the six-month economic outlook, which was down 7.61% from July levels; advisors’ confidence about the current outlook was also poor; it fell 5.81% for the month. However, advisors were still modestly optimistic over all: a reading of 100 is neutral on the ACI; the August number was 109.79, down from 115.24 in July.

Meanwhile, investors are feeling insecure, too. The UBS/Gallup Index of Investor Optimism plummeted 14 points to 73 in August, the third monthly decline in a row. The Index has been conducted monthly since October 1996, when its baseline score of 124 was set. The Economic Dimension of the Index, which measures investors’ feelings about the direction of the overall U.S. economy, dropped to its lowest point since August 1996. However, the Personal Dimension of the Index, which measures investors’ optimism about their individual investment portfolios, dipped only slightly.

The Index found that while the 800 investors in the survey are still fretting about high energy prices, taking second place among their concerns are housing and real estate worries: 80% of those surveyed said they believe economic conditions in the national residential real estate market are getting worse.