The Wells Fargo/Gallup Investor and Retirement Optimism Index jumped 30 points in the first quarter of 2017 to +126 – the highest it has been since the dotcom boom in November 2000.
The survey of 1,007 U.S. investors, conducted between Feb. 10-19, has two dimensions – economic and personal.
The economic dimension, which measures investor optimism about economic growth, unemployment, the stock market and inflation, rose 20 points to +46. Most of this came from investors feeling more upbeat about stocks and economic growth.
The personal dimension, which measures investors’ outlook for their income and investments, rose 12 points to +80, with slight increases among all components.
Among the key findings, 60 percent of investors say now is a good time to invest in the financial markets, up from 52 percent in late 2016. This is the highest this percentage has been since early 2011.
Thirty nine percent of investors also expect the percentage of income they pay in taxes to go up in the next few years, while 29 percent expect them to go down. Thirty one percent think their tax rate will stay the same.
When asked what they would do with the money if their tax bill were cut, 47 percent said they would increase their savings or investments, while 24 percent said pay down debt, and 10 percent said special purchases.
“Although it’s great to see investors are optimistic about financial markets and retirement security overall, it’s especially noteworthy that seven out of 10 would improve their financial health through either saving and investing or paying down debt because of a potential tax cut,” Joe Ready, head of Wells Fargo Institutional Retirement and Trust said. “Saving and investing enough is the number-one factor that will drive retirement outcomes.”
On the path of interest rates, 37 percent said higher interest rates would make them very or somewhat likely to transfer money out of the stock market and into more conservative investments.
Seventy eight percent of investors, up from 69 percent in the prior measurement in 2014, feel confident they will have enough money to maintain the lifestyle they want throughout retirement.
“Although we are experiencing rising account values and optimism, it’s important not to underestimate the importance of a thoughtful strategy and a written plan not only for saving and investing, but also for drawing down funds in retirement given the complexities of longevity, taxes, and when to begin Social Security benefits,” Ready said.