U.S. investor optimism sunk to the lowest level since the fourth quarter of 2016 following the market volatility seen at the start of this month, Wells Fargo said Thursday, citing the findings of a Wells Fargo/Gallup Investor and Retirement Optimism Index survey.
Confidence among American investors weakened in the 12-month outlook for the stock market and U.S. employment, according to Wells Fargo, which pointed out that the third quarter Wells Fargo/Gallup Investor and Retirement Optimism Index is now 72. That’s down 13 points from 85 in the second quarter and far below the post-recession high of 117 reached in the fourth quarter of 2017, the firm said, noting in an announcement about the findings that this was the largest quarterly drop for the index in over three years.
And that was prior to U.S. stocks suffering their worst day of the year Aug. 14, when the S&P 500 sank almost 3% and the Dow Jones industrial average plunged 800 points in its worst rout of the year, sparked when the 10-year Treasury rate slid below the two-year for the first time since 2007. The 30-year yield fell to the lowest on record also.
The Wells Fargo/Gallup poll was conducted Aug. 5-11, so, “even before the volatility of the past two weeks, investors were rattled by the market decline at the start of the month, including a nearly 800-point drop in the Dow at the start of the survey period,” Andy Byer, head of Client Service and Advice for Wells Fargo Advisors, said in the company’s announcement.
“I’d prefer not to speculate about what the index would have been if the poll had been fielded later,” he told ThinkAdvisor, adding: “What I do know is that market volatility was the key driver of declining investor optimism in early- to mid-August, and certainly could continue to be a factor moving forward.”
Confidence fell about the same among investors whether they were retired or not, as well as among those with $100,000 or more invested and those with less than that invested, Wells Fargo said of its poll findings.
Investor optimism dropped this quarter across all four components of the index’s economic dimension, including investors’ 12-month outlook for the stock market and 12-month outlook for unemployment, which were each down nine percentage points, the firm said. Investor optimism about economic growth declined six points, while inflation fell five points.
Coupled with reduced confidence in the financial market, the percentage of investors who said now was a good time to invest in the market fell to 59% this quarter from 65% in the prior quarter, Wells Fargo said. Of special significance was the fact that it was the first time in Wells Fargo/Gallup’s tracking of this measure (started in early 2018) that confidence in the market buying climate fell below 64%, Wells Fargo noted.