More investors now see a "politically divided federal government" as the top factor affecting the investment climate than the unemployment rate or federal budget deficit, according to a recent poll.
In a Wells Fargo/Gallup poll, 69 per cent of US investors shared the view that political divisions were key to the investment climate, compared to 67 per cent citing the unemployment rate and 67 per cent citing the federal budget.
Amid such worries, overall investor optimism declined in July, down to +16 from +24 in May, and down from +40 in February. Under half of respondents think now is a good time to invest.
The “fiscal cliff” – or the dilemma the US government faces at the end of the year, when several stimulus measures expire and additional budget-cutting measures are planned to come into effect – is also on the minds of investors. Over half (54 per cent) said they are paying a “great deal” or “quite a lot” of attention to the issue, and 61 per cent think the US economy will go into recession if the issue isn’t addressed.
“People watched the impasse of the debt ceiling negotiations last summer and the effect the breakdown had on the markets and 401(k) balances, so it makes sense that investors are attuned to policy affecting debt and taxes. Investors are clearly telling us they worry about a recession,” said Joe Ready, director of Wells Fargo Institutional Retirement and Trust.