Wealthy U.S. investor optimism fell in August

NEW YORK, Sept 5 (Reuters) - Optimism among wealthy U.S. investors fell in August by the biggest margin in six months, a monthly survey said on Wednesday, as a slumping housing market and volatile financial markets took a toll on confidence. The Spectrem Affluent Investor Index dropped 8 points to a reading of minus 1 in August from 7 in July, falling below zero for the first time in 12 months. The level indicates the investment outlook of households with at least $500,000 to invest has slipped deeper into "neutral territory," where it has been since June.

A subset of the index, the Spectrem Millionaire index, also fell 8 points to a reading of 7 in August from 15 in July, dipping into the neutral range from "mildly bullish" for the first time since March, the survey's publisher, research and consulting firm Spectrem Group, said in a statement.

The drops were the largest one-month declines in the two indexes since the affluent index fell 10 points and the millionaire index slid 14 between February and March. Those drops coincided with a global equity market sell off in late February that began with a big drop in China's main domestic stock market.

This time, global credit markets seized up and investors spent much of August sheltering themselves from the fallout from rising defaults among subprime mortgages. After the Federal Reserve in mid-August lowered the rate it charges U.S. banks for loans directly from the central bank, investors regained some of their appetite for risk.

The benchmark Standard & Poor's 500 index .SPX recovered to eke out a 1.3 percent gain for August, but the range from market top to bottom on the month was the largest in nearly five years.

"With the housing crisis and its immediate fallout on many investors' minds, optimism among the affluent and millionaires retreated significantly in August and now hover near the lows reached after the February 2007 market plunge," Spectrem President George Walper said. "Although the affluent index remains in neutral territory it has dipped below zero for the first time since August 2006, and millionaires have downshifted from mildly bullish to neutral," Walper said. "As long as the housing crisis continues to make headlines, investment confidence for the nation's wealthiest investors may well face a strong headwind."

In response to an open-ended question about the news story most affecting their economic outlook, 43 percent of affluent investors in August cited housing and real estate. Ranking second but well behind was interest rates, with 7 percent citing it as most important.

When that question was last asked in May, wealthy investors had been most concerned about the Iraq war and energy prices, Spectrem said.

The Spectrem Affluent Investor Index is based on 250, 10-minute telephone interviews each month, giving the data a margin of error of plus or minus 6.2 percentage points.

Interviews are conducted with the financial decision-makers in households with $500,000 or more in investable assets. The Spectrem Millionaire Investor Index is based on a subset of the overall survey group that can vary each month. It is typically drawn from more than 100 monthly interviews.

((Dan Burns, editing by Tom Hals; Wall Street Newsdesk 646 223-6110)) Keywords: USA ECONOMY/INVESTOR OPTIMISM

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