Sixty-one percent of U.S. investors in a survey released Monday by Wells Fargo said the Federal Reserve should not raise interest rates further, up from 46% of investors surveyed in May.

Forty-eight percent of respondents in the fourth-quarter Wells Fargo investor and retirement optimism index survey said raising rates would be bad for the economy, compared with 16% who said rate hikes would be beneficial. Thirty-seven percent said higher rates would not make much of a difference for the economy.

Nearly half of surveyed investors reported that their income had not kept up with the rate of inflation over the past four years.

The Wells Fargo Investment Institute said it expected a rate hike at the upcoming Federal Open Market Committee meeting that concludes on Dec. 19. ”Our current outlook is for three additional rate hikes over next year before the Fed ends its current rate hike cycle,” Brian Rehling, the institute’s co-head of global fixed income strategy, said in a statement.

Fifty-three percent of investors expressed faith in the Fed’s decision-making on interest rates, while 47% said they had little or no trust.

The fourth-quarter index survey was conducted by Gallup Panel in mid-November among 1,022 U.S. adults with $10,000 or more invested in stocks, bonds or mutual funds. The sample comprised 67% non-retirees and 33% retirees. Of total respondents, 39% reported annual incomes of less than $90,000; 61% reported $90,000 or more.

The survey results showed that half of investors in the fourth-quarter poll considered the current U.S. economy solid, while 11% described it as “booming.” However, a significant 39% used the adjectives “shaky” or “weak.”

Separately, the poll found that 40% of respondents perceived the economy about as strong as it has been reported to be, and 23% felt it was stronger. Thirty-seven percent said it was not as strong as reported.

The institute said it did not foresee a recession next year, but noted that risks increase beyond 2019.

Wells Fargo’s investor and retirement optimism index, a consumer-based barometer of how investors view the investing climate, did not move in the fourth quarter, coming in at 98, the same level as in the third quarter. The index has an adjusted baseline score of 100 from when it was established in October 1996. It peaked at +152 in January 2000, at the height of the dot-com boom, and hit a low of -81 in February 2009.

Wells Fargo said the index has hovered near 100 for most of the past two years, following a 16-year period when it was consistently below that level.

Along with results of the index survey, Wells Fargo published its 2019 outlook, “The End of Easy.”

Inflation Angst

The fourth quarter survey found that inflation could be an even bigger stressor for investors than more interest rate hikes. Seventy percent of respondents expressed concern that inflation could go a lot higher, versus 30% who were more worried that interest rates could do so.

Both retired and non-retired investors saw inflation as the greater risk, with retirees being slightly warier of inflation, according to the survey.

Some eight in 10 of the investors surveyed believed that a potential trade war with China would increase prices and likely raise inflation in the U.S. Just 16% said a trade war with China was unlikely to force U.S. prices higher.

“Investors would likely cheer news of a solid and definitive U.S. trade agreement with China,” Rehling said. “Continued tensions in the U.S.-China trade dynamic could further exacerbate uncertainty in U.S. financial markets.”

The poll, conducted prior to the G-20 meeting and negotiations between the U.S. and Chinese presidents on trade that ended Dec. 1, found 53% of investors worried about a U.S.-China trade war, versus 47% who were not worried.

At a time when investors are grappling with concerns on inflation and trade, only 16% of surveyed investors said they were very concerned about the recent sharp volatility in the markets. A strong 68% cohort purported to be comfortable riding out a 500-point drop in the stock market n a single day and therefore maintaining their equity positions.

Longevity Expectations

Investors in the poll said they expected to live to a median age of 85, with 47% saying they would live between the ages of 86 to perhaps 96 or longer and 9% expecting to live past age 96.

As to their appetite for risk to generate higher returns on their investments, 52% had little or none, while 48% would be willing to take a fair amount of risk or a lot. Of the 47% of investors who expected to live past 86, 51% said they would be inclined to take risk to potentially generate higher returns.

Asked how likely it was that they could remain financially comfortable if they were to live to 100, just 15% said it was very likely, and another 40% considered it likely. The remaindered said maintaining financial comfort to that age was unlikely.

“With lengthening lifespans in the modern age, and low yields in savings accounts, a question for investors is ‘how much risk are they willing to take to generate return?’ especially if they are going to live into their 90s,” Rehling said. “We see essentially a split among investors, with a little less than half willing to take on risk to generate return.”

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