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Business News/ Money / Calculators/  US investor optimism highest since crisis as Trump era dawns
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US investor optimism highest since crisis as Trump era dawns

Consumer confidence is now hovering near the highest level since the year 2004, and market sentiments are unabashedly bullish.

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It’s been a month since the post-election rally in US stocks stalled, but to hear high net worth investors tell it, there’s only blue sky ahead as Donald Trump prepares to take office.

Almost 70% of respondents in a UBS Group AG survey expect “strong returns" in the stock market in the next 6 months, up from about 50% before the election, according to the bank’s quarterly poll of clients.

Expectations that the economy will improve over the next year reached the highest level since before the 2008 financial crisis, the report showed.

Reasons for optimism

The data are the latest sign that Americans have turned optimistic about the prospects for the world’s largest economy since Donald Trump’s election.

Consumer confidence is now hovering near the highest level since the year 2004, and market sentiments are unabashedly bullish.

While the views have been tested lately—the S&P 500 Index has barely budged since the US Federal Reserve raised interest rates on 14 December 2016—UBS says the sunny outlook can push the market higher.

“Awash in new confidence, many wealthy investors feel ready to deploy cash and are actively hunting for investment opportunities," UBS wrote in a note to clients on 18 January, after surveying 2,025 investors with at least $1 million in assets between 20-27 December 2016.

“If cash moves off the sidelines and business investment increases, it will be a sure sign that many investors like the early direction of the new administration."

It’s not just Trump’s supporters that are optimistic either. Here’s a breakdown from the report:

Respondents predicated their outlook on expectations that Trump and the Republican-led Congress can end the gridlock that has characterized federal government and enact policies that boost business investment, UBS said.

“Investors cited Trump’s pro-business policies—including lower personal and corporate taxes—expectations for less regulation and increased infrastructure spending, which they believe will spur US economic growth, as the primary sources of their optimism," the note said.

The report underpins a shift in investor sentiment from before the election, which was captured in Wall Street strategist forecasts.

The majority of their outlooks for this year rose after the election and hinge on whether Trump can push through his policy proposals.

Surveys by brokerage firm Charles Schwab Corp. also show the change.

Pessimism is so passe

Before Trump’s win, investors were pessimistic about what he would mean for their portfolios and the economy.

According to the first survey taken 20-21 October 2016, almost 60% believed that Trump would be bad for the economy in the short term.

Three weeks later, in a survey taken between 9-11 November 2016, only 48% said that his policies would be harmful.

The same shift happened when investors were asked about their portfolios.

Before the election, 57% said that Trump would have a negative impact and only 22% said that he would have a positive impact.

After, 49% had a negative outlook while 30% held more positive views.

While one might say that investors simply took the market’s move higher as their change in near-term views, the S&P 500 Index rose only 1% in the three days of the second survey.

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Published: 22 Jan 2017, 11:38 PM IST
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