Economic Confidence Among Affluent Rises Sharply After Election Season

CLEVELAND, Jan. 24 /PRNewswire-FirstCall/ -- Economic confidence among affluent Americans regarding the overall state of the economy rose seven points this quarter, following a significant, 13-point decline last quarter during the 2004 election season -- according to the latest quarterly McDonald Financial Group Affluent Consumer Confidence Index results, released today. This represents one of the largest quarter-to-quarter increases in two years.

The overall score for the January McDonald Financial Group Affluent Consumer Confidence Index was 55 out of 100 -- a seven-point (or 15 percent) increase since the last survey in October (48). The increase in affluent consumer confidence this quarter returns the Index to a similar level as one year ago (56 in January 2004).

As a result of their positive feelings about today's economy, affluent respondents say they plan to increase their spending and investing levels over the next quarter, with 30 percent of affluent Americans saying they would put more money in the stock market over the next three months. Thirty-two percent of business leaders polled say they plan to increase hiring levels over the next three months, a 15-point increase from last quarter. However, while the current picture appears quite positive, affluent consumers still have concerns about the future of the economy due to a number of issues facing the country such as Iraq, a perceived real estate bubble and the national deficit.

David Legeay, senior vice president, McDonald Financial Group, said, "We found that confidence among the affluent severely declined during the Presidential election period as debates among the candidates brought issues like jobs and the economy to the forefront. Now, with the election decided, solid GDP growth and stock market gains in the last quarter of 2004, affluent Americans again appear to be very confident about the current state of the economy. Unlike previous quarters, when confidence has not necessarily translated into higher spending and investing intentions, in this quarter larger numbers of affluent Americans say they both feel more confident and plan to take action."

The McDonald Financial Group Affluent Consumer Confidence Index -- a quarterly measure of market sentiment -- is based on a national survey of randomly selected individuals with investable assets of $500,000 or more, and/or personal annual income of $150,000 or more. The poll was conducted by independent research firm Penn, Schoen & Berland between Dec. 18, 2004 and Jan. 7, 2005, representing the ninth wave of testing for the survey, which debuted in January 2003. The Index represents McDonald Financial Group's ongoing effort to gain real-time insight into the attitudes and concerns of its target market.

Renewed Confidence Leads to Higher Spending and Investing Levels

After dropping 17 points last quarter, confidence in the S&P rising over the next quarter has rebounded back to July 2004 levels. Sixty percent of affluent consumers in the survey said that they believe the S&P will rise over the next three months, up 17 points from October when 43 percent said so.

Also in a dramatic shift from last quarter, 48 percent of affluent Americans now say they are more focused on wealth accumulation than on wealth preservation, up 25 percentage points from 23 percent last quarter.

As a result, intentions to invest in the stock market over the next three months rebounded from their lowest point last quarter to their highest point in the survey. Thirty percent of affluent Americans polled said they would put more money in the stock market over the next three months, up 12 points from the 18 percent who said so last quarter, and tied with the all-time highest level in the survey (October 2003).

The percentage of those who say they would invest more of their assets in the stock market this year than last year jumped six points to 23 percent, up from 17 percent last quarter.

Other indications of increased spending activity include: - Intentions to take a vacation requiring air travel in the next three months jumped 16 points to 62 percent this quarter and are at a higher level than they were in both January of 2004 (60 percent) and January of 2003 (60 percent). - Plans to purchase a car rebounded six points this quarter to 15 percent up from nine percent last quarter and are consistent with previous quarters. - Intentions to make home improvements increased by seven points to 21 percent since last quarter. - Plans to purchase a second home in the next three months are up five points since last quarter to 10 percent.

Legeay said, "This data reinforces what we are hearing from clients: The affluent are optimistic about the economy and this is translating into increasing spending and investing intentions. As our clients re-evaluate their portfolios, we are advising them not only to focus on investing opportunities but also to take a broad, integrated approach to their financial plan and examine a full range of opportunities from charitable giving strategies and college saving plans to investments and cash management strategies."

Employment Picture Rebounds as Business Leaders Plan to Increase Hiring

Thirty-two percent of business leaders -- who represent 43 percent of those polled in the survey -- say they plan to increase hiring in the next three months. This represents a 15-point increase from last quarter, when 17 percent said they would increase hiring. Business leaders are defined in the survey as those who own their own businesses or are senior-level executives.

In addition, the latest McDonald Financial Group survey reveals an improved employment outlook among affluent Americans. In the current survey, 29 percent say jobs are "plentiful," up from 23 percent in October. The number of affluent Americans who say jobs are "hard to get" fell from 37 percent in October to 23 percent in the current survey.

Some Doubt Remains about Iraq, the Deficit, Real Estate Bubble

Although overall economic optimism has significantly improved since October and has returned to near all-time high levels, some doubts remain among affluent Americans about the future of the economy due to several issues facing the country. Survey findings include:

Iraq - For the third quarter in a row, the survey saw increased concerns over Iraq, with more respondents than ever before, 36 percent, saying Iraq was the most important issue facing the country today (up from 27 percent in October). The current level of concern stands well above levels in April 2004 (eight percent) and January 2004 (11 percent) during the Iraq war. - Nearly half, 46 percent, of affluent Americans believe the situation in Iraq will contribute to a sluggish economy during the next four years, up from 36 percent last quarter. - A full 58 percent say they are concerned that a damaged American image due to the situation in Iraq will hurt U.S. international business, up from 55 percent last quarter. The National Deficit - There is a high level of concern about the national deficit, with 70 percent of affluent Americans saying they are "very" or "somewhat concerned." - Fifty-seven percent think that the national deficit will have a negative impact on the economy over the next year. - Most affluent Americans, 62 percent, are highly doubtful that the national deficit will be cut in half over the next five years.

Legeay continued, "In the Index, we ask respondents what they think is the most important issue facing the country today. This quarter represents the first time the national deficit showed up in a meaningful way. It is now one of the top causes for concern among the affluent, along with issues like the situation in Iraq."

Real Estate Bubble - Real estate bubble fears are now on par with their highest point in the survey, with 56 percent of affluent Americans now saying there is a real estate bubble (up from 54 percent in October and tied with the survey's high point in July of 2004). - As a result, intentions to move assets into real estate remain low at 24 percent, slightly up from 20 percent in October. - Thirty-four percent are concerned that rising interest rates will cause a significant drop in housing prices. The percentage of those who are "very concerned" jumped five points this quarter to 12 percent.

Legeay said, "Interestingly, our survey revealed that the affluent are more concerned about governmental topics like Iraq and the deficit having an impact on the stock market than corporate issues like unemployment and earnings, which we believe is a good indicator of their investing confidence. The affluent seem to be at a point now where they are confident enough about the economic recovery and current economic conditions to move forward with spending and investing plans.

"McDonald Financial Group has found that surveying the affluent on a quarterly basis -- and gaining these insights -- helps us better understand the attitudes and concerns of our target market. Regularly surveying the nation's affluent population is important, as many of the affluent are business owners or serve in executive positions where they are responsible for making capital expenditure and hiring decisions. As a result, their opinions can be an important barometer of where the economy is headed," Legeay added.

Survey Methodology

Penn, Schoen & Berland (PSB) conducted approximately 400 interviews among a representative nationwide sample of affluent individuals between Dec. 18, 2004 and Jan. 7, 2005. For the purposes of the survey, affluent individuals were defined as having a personal (not family) annual income of $150,000 or more, and/or having personal investable assets of $500,000 or more (not including primary residence). The margin of error among the national audience is +/- 4.9 percent.

About Penn, Schoen & Berland

Penn, Schoen & Berland ( http://www.psbsurveys.com/ ) is an innovative strategic market research firm with offices in New York, Washington, D.C., and Denver. PSB has conducted strategic research for multinational Fortune 500 companies and major political campaigns in more than 65 countries around the world.

About McDonald Financial Group

As part of Cleveland-based KeyCorp , McDonald Financial Group offers integrated financial services -- including banking, estate planning, financial planning, retirement planning, brokerage, trust, individual asset management, insurance advice and services, and charitable giving counsel -- to affluent individuals in offices in 15 states. Securities are offered through McDonald Investments Inc., member NYSE/NASD/SIPC.

About KeyCorp

Cleveland-based KeyCorp is one of the nation's largest bank-based financial services companies, with assets of approximately $88 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally.