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Wells Fargo: Investor Confidence at Three-Year Low Following Market Tumult
[August 22, 2019]

Wells Fargo: Investor Confidence at Three-Year Low Following Market Tumult


According to the Wells Fargo (News - Alert)/Gallup Investor Optimism Index, U.S. investor optimism fell to its lowest point since the fourth quarter of 2016 as investor confidence weakened in the 12-month outlook for the stock market and U.S. employment.

The third quarter Wells Fargo/Gallup Investor and Retirement Optimism Index is now 72, down 13 points from 85 in the second quarter and well below the post-recession high of 117 reached in the fourth quarter of 2017. This is the largest quarterly drop for the index in more than three years.

"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," said Andy Byer, head of Client Service and Advice for Wells Fargo Advisors.

According to the Wells Fargo Investment Institute report "The Cold Winds of August - Signals to Watch," drivers of the volatility include:

  • China trade and tariffs
  • Currency concerns
  • Bond yield curves and credit spreads
  • Consumer indicators
  • Business and consumer confidence

The poll was conducted Aug. 5-11, and captured investor sentiment in the wake of five consecutive days of market sell-offs leading up to the start of the survey. Confidence fell about equally among investors who are retired and those who are not retired as well as among those with $100,000 or more invested and those with less than $100,000 invested.

The Wells Fargo/Gallup Investor and Retirement Optimism Index measures U.S. investor confidence in the investing climate, including perceptions of the economy and their own financial situation. For this survey, investors are defined as U.S. adults with $10,000 or more invested in stocks, bonds or mutual funds.

Confidence shaken in the economy, but not personal finances

Investor optimism fell this quarter on all four components of the Index's economic dimension, including investors' 12-month outlook for the stock market and 12-month outlook for unemployment, both down nine percentage points. Investor optimism about economic growth dropped six points, and inflation is down five points.

By contrast, investor optimism for all three components of the Index's personal financial dimension were essentially flat. This includes investors' outlook for reaching their five-year and 12-month investment targets and for maintaining their household income over the next year.





Investor Optimism on Index Dimensions (% very/somewhat optimistic)

Year Ago

Last Quarter

This Quarter

Change this

(2018 Q3)

(2019 Q2)

(2019 Q3)

quarter

Economic Dimension - 12-month outlooks

 

 

 

 

Unemployment

54

57

48

-9

Economic growth

52

50

44

-6

Stock market performance

47

48

39

-9

Inflation

24

30

25

-5

 

 

 

 

 

Personal Dimension

 

 

 

 

Reaching 5-year investment goals

65

58

61

+3

Maintaining/increasing 12-month HH income

67

59

57

-2

Reaching 12-month investment targets

57

50

53

+3


Along with reduced confidence in the market, fewer investors this quarter (59%) than last (65%) say now is a good time to invest in the financial markets. This marks the first time in Wells Fargo/Gallup's tracking of this measure (since the start of 2018) that confidence in the market buying climate has dropped below 64%.

At the same time, investors' outlook for their own financial situation in retirement is steady, with 76% saying they feel very confident or somewhat confident they will have enough money to maintain the lifestyle they want throughout their retirement.

"With the market still up from the start of the year, recent market losses have not cut into investors' underlying confidence in their portfolio or long-term retirement goals," Byer said. "Even with volatile markets, investors should keep their focus on their long-term investment plans. And making sure investments are aligned with their personal risk tolerance and rebalancing portfolios to match their investment objectives."

About the Wells Fargo/Gallup Investor and Retirement Optimism Index

The results of this Wells Fargo/Gallup Investor and Retirement Optimism Index are based on a Gallup Panel web study completed by 2,091 U.S. investors, aged 18 and older, from August 5-11, 2019. The Gallup Panel is a probability-based longitudinal panel of U.S. adults who Gallup selects using random-digit-dial phone interviews that cover landline and cellphones. Gallup also uses address-based sampling methods to recruit Panel members. The Gallup Panel is not an opt-in panel. The sample for this study was weighted to be demographically representative of the U.S. adult population, using the most recent Current Population Survey figures. For results based on this sample, one can say that the maximum margin of sampling error is ±5 percentage points at the 95% confidence level. Margins of error are higher for subsamples. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error and bias into the findings of public opinion polls.

For this study, the American investor is defined as an adult in a household with stocks, bonds or mutual funds of $10,000 or more, either in an investment account or in a self-directed IRA or 401(k) retirement account. About two in five U.S. households have at least $10,000 in such investments. The sample consists of 61% non-retirees and 39% retirees. Of total respondents, 41% reported annual incomes of less than $90,000; 59% reported $90,000 or more. The Wells Fargo/Gallup Investor and Retirement Index is an enhanced version of Gallup's Index of Investor Optimism, which provides the historical trend data. The median age of the non-retired investor is 50 and the retiree is 71.

The Index of Investor Optimism 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.

About Wells Fargo Advisors

With $1.7 trillion in client assets as of June 30, 2019, Wells Fargo Advisors provides investment advice and guidance to clients through 13,799 full-service financial advisors and referrals from 5,390 licensed bankers. This vast network of advisors, one of the nation's largest, serves investors through locations in all 50 states and the District of Columbia. Wells Fargo Advisors is the trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. All data includes Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, as of June 30, 2019. www.wellsfargoadvisors.com

About Wells Fargo Investment Institute

Wells Fargo Investment Institute, Inc., is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company, providing investment research, strategy, manager research and thought leadership within the Wealth and Investment Management division (WIM), with the goal of supplying world class advice to the company's financial and wealth advisers.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo's vision is to satisfy our customers' financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investment and mortgage products and services, as well as consumer and commercial finance, through 7,600 locations, more than 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 32 countries and territories to support customers who conduct business in the global economy. With approximately 263,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune's 2019 rankings of America's largest corporations. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.

Cautionary Statement about Forward-Looking Statements

This news release contains forward-looking statements about our future financial performance and business. Because forward-looking statements are based on our current expectations and assumptions regarding the future, they are subject to inherent risks and uncertainties. Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. For information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the "Forward-Looking Statements" discussion in Wells Fargo's most recent Quarterly Report on Form 10-Q as well as to Wells Fargo's other reports filed with the Securities and Exchange Commission, including the discussion under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2018, available on its website at www.sec.gov.


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