Investors Worry About Politically Divided Gov't

Investors are as pessimistic about the economy as they were last year after the debt ceiling debate, and the fiscal cliff is just one of many concerns they have about the state of the U.S. investment climate.

Investors are as pessimistic about the economy as they were last year after the debt ceiling debate, according to a new Gallup poll.

Earlier in 2012, investors were much more positive about the economy, but the latest results of the Wells Fargo/Gallup Investor and Retirement Optimism Index show investors are now showing negative expectations.

According to Gallup, the fiscal cliff is just one reason for the increased pessimism. In mid-November, 69% of the poll’s respondents said the fiscal cliff was already slowing the economy. It’s widely believed that going over the cliff would send the U.S. into another recession and 70% of investors polled by Gallup believed that to be true.

However, the U.S. investment climate is facing a multitude of issues, all equally important and potentially devastating, according to respondents.

Other important factors of the increased pessimism are America’s politically divided federal government (69%) and the federal budget deficit (69%). Those are the two top factors hurting the investment climate in the U.S. The unemployment rate (67%) and the global economic slowdown (63%) are also large factors.

Of less importance, but still considered factors, were the availability of credit (34%), home prices or values (37%), financial condition of state and local governments (41%), European debt crisis (46%), and the price of energy (50%).

Investors find today’s politically divided federal government is very worrying for the investment climate, according to Gallup, because it has resulted in difficulty for anything to happen in the nation’s capital (including a fiscal cliff deal).

As a result of fiscal cliff concerns, investors are adjusting their strategies by bringing income into 2012 in anticipation of higher capital gains taxes in 2013.

“It is important to note that unlike the debt ceiling -- any fiscal cliff agreement will have real-world consequences for the average American,” according to Gallup. “These could include significant tax increases not only on those with higher incomes, but also in terms of payroll taxes, dividend taxes, and capital gains taxes on those in other income categories. Further, significant cuts in federal expenditures for defense, unemployment insurance, and other government programs could also be included.”