The Wells Fargo/Gallup Investor and Retirement Optimism Index increased in November for the third straight quarter, bringing it to a nine-year high. The index, which gauges investor optimism, now registers +96, up from +79 in the third quarter. Among retired investors, the optimism index improved 36 points to +117 while increasing 11 points among non-retired investors to +89. The Wells Fargo/Gallup Investor and Retirement Optimism Index fourth-quarter survey was conducted by telephone with 1,012 U.S. investors November 16-20. The index last approached the current level in May 2007, prior to the 2007-2009 recession, when it registered +95.

Bright outlook for 2017...

Of the seven index components, investor optimism improved the most on the 12-month outlook for economic growth. Fifty-seven percent of investors, up from 45% in the third quarter, are now optimistic about economic growth while only 27% are pessimistic, down from 35%.

Investors’ outlook for unemployment also improved in the fourth quarter, with 52% optimistic, up from 47%. Fifty-four percent of investors are now optimistic about the stock market. That is little changed from 51% last quarter but sharply higher than in the first quarter of 2016 when it was 32%.

“Rising investor optimism and the stock market reaching all-time highs is great news to end the year on, but it isn’t necessarily driving investors to put their money into the markets,” said Scott Wren, senior global equity strategist for Wells Fargo Investment Institute. “Investors are more interested in the markets, but it takes time for this optimism to translate to flows into the stock market, especially when investors have been cautious for so long,” Wren added.

Investors cautiously optimistic following the election...

The poll was conducted just over a week after the U.S. elections and the Dow Jones Industrial average had experienced a better than 500-point post-election surge, but before it crossed the 19,000 mark.

When thinking about the impact of this year’s presidential and congressional elections, 46% of investors say the outcome of the election makes them feel more optimistic about the U.S. economy over the next 12 months, eclipsing the 38% who say it makes them feel less optimistic. Another 15% say the election has had no effect on their expectations for the economy.

“There’s a reason for the optimism as the U.S. economy is slowly chugging along. Whether the markets are experiencing a post-election or Santa Claus rally, investors should continue to focus on the fundamentals, valuations, and where the economy and earnings are headed over the next six to 12 months,” Wren said.

In line with investor optimism about economic growth, 57% of investors say they feel positive about where the economy is heading into 2017, while 38% say they are “bracing” themselves for an economic downturn. Notably, there are strong political differences in these views, with most investors who identify as Republican feeling positive about where the economy is headed (79%) and most Democratic investors (68%) saying they are bracing themselves for an economic downturn. Because more investors identify as or lean Republican than Democratic — 53% vs. 40% — the balance of investor expectations for economic growth in 2017 is positive.

Investors believe election results will affect their net worth...

Overall, 37% of investors — including 42% of retirees and 35% of non-retirees — believe the election results will have a major impact on their net worth. An additional 42% say it will have a minor impact, while 19% say it will have no impact. Of all investors, half say the election will have a positive impact on their net worth and 28% say a negative impact.

Most investors expect market volatility...

Nearly three-quarters of investors (74%) say the stock market will be volatile in 2017, including one in five investors (21%) who expect the stock market to be highly volatile, up slightly from 16% at this time last year. Another 53% are expecting it to be somewhat volatile, while just 23% of investors say it will not be too volatile.

When looking back on 2016, nearly six in 10 investors describe the stock market as highly volatile (12%) or somewhat volatile (46%), while 39% say it was not too volatile.

“Last year was not as volatile as some investors perceived it to be, and we are not forecasting a lot of volatility in the U.S. markets for the first half of the New Year. We encourage investors to think of volatility in terms of what opportunities it may present,” Wren said.

Women more concerned about volatility than men...

When asked about their reaction to the stock market volatility that has occurred since the 2008-2009 market downturn, 44% of investors say volatility still bothers them as much as before, 42% say they are better at shrugging it off, and 11% say it doesn’t bother them.

Retirees and non-retirees have similar views of volatility, but there are differences by gender. Men exhibit less concern, with 39% saying volatility still bothers them and 46% saying they have gotten better at shrugging it off, whereas 48% of women say volatility still bothers them and 38% say they have gotten better at shrugging it off.

“Investors have a long memory when thinking about their portfolios from the last economic downturn. It is important to remember that having a long-term investment plan can help investors navigate through the rough patches of the markets,” said Wren.

Working investors expect income growth in 2017...

The majority of working investors (57%) expect their wages or employment income to increase in the coming year whereas just 5% foresee it decreasing. More specifically, 7% predict their income will increase a lot next year, 30% say it will increase a moderate amount, and 20% say a little. In 2016, 62% of investors saw their income rise and 10% saw it decrease. More investors expect their income to stay the same next year (38%) than say it was steady in 2016 (28%).

Investors aged 18-49 are more likely than those 50+ to expect their wages to increase in 2017 (65% vs. 47%), as well as to say their wages did increase in 2016 (69% vs. 52%).

These findings are part of the Wells Fargo/Gallup Investor and Retirement Optimism Index, which was conducted Nov. 16-20, 2016, by telephone. The Index includes 1,012 investors randomly selected from across the country with a margin of sampling error of +/- four percentage points. For this study, the American investor is defined as an adult in a household with total savings and investments of $10,000 or more. About two in five American households have at least $10,000 in savings and investments. The sample size is comprised of 73% non-retirees and 27% retirees. Of total respondents, 42% reported annual income of less than $90,000; 58% reported $90,000 or more. The Wells Fargo/Gallup Investor and Retirement Index is an enhanced version of Gallup’s Index of Investor Optimism that provides its historical data. The median age of the non-retired investor is 46 and the retiree is 70.

The Index had a baseline score of 124 when it was established in October 1996. It peaked at 178 in January 2000, at the height of the dot-com boom, and hit a low of negative 64 in February 2009.