Economic Confidence Among Affluent Sees First Major Decline, Dropping 13 Points Since July, According to Latest McDonald Financial Group Survey

Decline Fueled by Concerns About Iraq, Terrorism, Energy Prices, Unemployment,

Interest Rates, Real Estate Bubble -- Key Issues in Upcoming Presidential

Elections



Doubt Leads to Drop in Spending and Investing Intentions Among Affluent

Americans



Oct 25, 2004, 01:00 ET from KeyCorp

    CLEVELAND, Oct. 25 /PRNewswire-FirstCall/ -- Economic confidence among
 affluent Americans regarding the overall state of the economy dropped 13
 points from July 2004, representing a major decline and the first since April
 of 2003 -- according to the latest quarterly McDonald Financial Group Affluent
 Consumer Confidence Index results, released today.  The decreased optimism was
 based on strong uncertainty among the affluent about the economy, fueled by
 concerns about Iraq, terrorism, energy prices, unemployment, interest rates
 and a perceived real estate bubble -- many of the key issues in the upcoming
 Presidential elections.
     The overall score for the October McDonald Financial Group Affluent
 Consumer Confidence Index was 48 out of 100 -- a 13-point (or 21 percent)
 decrease since the last survey in July (61).
     In a sharp rise from last quarter, 42 percent of affluent Americans
 surveyed believe the economy is headed in the wrong direction, compared with
 only 23 percent who said so in July.  In a 19-point decline from July
 (72 percent), 53 percent said the economy is headed in the right direction.
     David Legeay, senior vice president, McDonald Financial Group, said, "For
 the first time since our survey's debut, we are seeing a major decline in
 affluent consumer confidence.  As the presidential election draws closer and
 topics like Iraq, terrorism and the economy are at the forefront of news
 coverage and campaign issues, the affluent appear to be increasingly concerned
 and uncertain about the economy.  I would note, by way of context however,
 that while these results are sobering, confidence levels are relatively the
 same as they were back in October of 2003 when the affluent had become
 increasingly optimistic after gains in the stock market, tax cuts and job
 increases."
     Douglas Schoen, a partner with Penn, Schoen & Berland -- the firm that
 conducted the actual polling for the MFG survey -- said, "We think the
 findings of this survey are particularly significant on the eve of the
 presidential election as the affluent are known to vote in strong numbers. In
 fact, 96 percent of survey respondents said they would vote in the 2004
 election, while 93 percent said they voted in the last election.
 Additionally, 51 percent of affluent Americans say they are much more
 interested in the current election than they were in the 2000 Presidential
 election."
     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 Sept. 27, 2004 and
 Oct. 8, 2004, representing the eighth 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.
 
     Affluent Very Uncertain About Current and Future Economy
 
     The decline in economic confidence among affluent Americans was revealed
 by several key survey findings about the current and future state of the
 national economy:
 
      * Forty percent of affluent Americans said the economy was "excellent" or
        "good" compared with 60 percent who said the economy is "fair" or
        "poor," a significant drop since last quarter, when 53 percent rated
        the economy as "excellent" or "good" and 48 percent replied "fair" or
        "poor."
      * Seventy-six percent surveyed said they were concerned about the current
        state of the economy versus 23 percent who said they were not
        concerned, representing a significant increase from the July survey in
        which 64 percent said they were concerned and 35 percent said they were
        not concerned.
      * Forty-two percent expect the economy to get better over the next three
        months, a reversal from the 57 percent who said so in July.
      * The percentage of those who believe the economy will get worse over the
        next quarter rose from 6 percent in July to 13 percent in the current
        survey.
 
     Legeay added, "Although this quarter's survey results revealed a sharp dip
 in affluent Americans' confidence, we advise clients to remember that this is
 roughly where confidence levels were a year ago and to keep the longer horizon
 in mind. We firmly believe that sound financial strategies integrate all
 aspects of wealth -- banking, trust and investments -- and are built on long-
 term objectives and the ability to stay the course while making tactical
 adjustments, not around reactions to short-term fluctuations and uncertainty."
 
     Uncertainty Fueled by Concerns About Iraq, Terrorism, Energy Prices,
 Unemployment, Interest Rates and Real Estate Bubble
 
     This quarter's MFG survey also saw increases in concerns over Iraq,
 terrorism, energy prices, unemployment, interest rates and a housing bubble --
 all key issues on which the overall affluent consumer confidence decline was
 based.  Major findings include:
 
     Iraq/Terrorism:
 
      * More respondents (27 percent) see Iraq as the top issue facing the
        country today than ever before.
      * Half of affluent Americans say Iraq (27 percent) and terrorism
        (23 percent) are the most important issues facing the country, compared
        with the economy (14 percent) and unemployment (3 percent).
      * When asked how the war in Iraq will affect the U.S. economy four years
        from now, 39 percent surveyed said "significantly" or "very
        significantly."  Twenty-five percent said "not at all."
      * More than a third (36 percent) believe the situation in Iraq will
        contribute to a sluggish economy over the next four-year Presidential
        term.
      * Fifty-five percent of respondents say they are concerned that a damaged
        American image abroad due to the Iraq war will hurt U.S. international
        business.
 
     Energy prices:
 
      * Nearly 7 in 10 (67 percent) respondents believe that higher energy
        prices pose a major concern for U.S. businesses, a 10-point increase
        over last quarter (57 percent).
      * Compared to last quarter, the number of affluent Americans who say they
        are "very concerned" with gas prices jumped 16 points to 40 percent.
 
     Employment picture:
 
      * The survey saw a 12-point increase in those who say "jobs are hard to
        get" (37 percent compared to 25 percent who said so in July).
      * The percentage of those who say "jobs are plentiful" dropped 12 points
        to 23 percent from 35 percent in July.
      * The percentage of business leaders saying they will increase hiring in
        the next three months is down 17 points (to 17 percent from 34 percent
        in July).
 
     Interest rates:
 
      * Half of affluent Americans are concerned that expected interest rate
        hikes will negatively impact the economy.
 
     Real estate bubble:
 
      * Real estate bubble fears are at their second highest point in
        7 quarters. Fifty-four percent now believe there is a real estate
        bubble, similar to 56 percent in July.
      * Twenty percent of respondents are moving assets into real estate,
        marking the lowest percentage of people doing so since the survey
        began.
 
     Affluent To Curb Spending and Investing Due to Economic Doubt
 
     The MFG survey revealed that affluent Americans are planning to hold back
 on spending and investing in the stock market due to their uncertainties about
 the economy.
     After increasing last quarter, confidence that the S&P 500 will rise over
 the next three months dropped to its lowest point since the survey began.
 Forty-three percent of respondents believe the S&P will go up over the next
 quarter, compared with 60 percent who said so last quarter.
     As a result, the number of affluent who are investing more in the stock
 market this year compared to last year fell to a six-quarter low of 17 percent
 (down from 24 percent in July). Thirty-six percent say they will invest less
 in the stock market, up from 26 percent who said so in July.
     Intentions to invest in the stock market over the short term are also at
 their lowest point since the survey began, with 36 percent saying they will
 invest less over the next three months (versus 25 percent in July) and 18
 percent saying they will invest more in the market (down from 23 percent in
 July).
     Additional survey findings on curtailed spending intentions include:
 
      * For the second quarter in a row, intentions to plan a vacation
        requiring air travel in the next three months declined and are at their
        lowest levels since the survey began.  Forty-six percent of affluent
        Americans plan to take a vacation by air in the next three months.
      * The intent to purchase high value collectibles has declined 6 points to
        4 percent, on par with its lowest level in the survey.
      * After remaining stable (at about 20%) over the last five quarters, the
        percentage of respondents in the October survey indicating they are
        planning to purchase a car in the next three months declined to 9
        percent -- the lowest point since the survey's inception.
      * Plans to purchase a second home in the next three months are down
        7 points to 5 percent (from 12 percent in July).
      * Intentions to make a home improvement have dipped to their lowest point
        since the survey began. Fourteen percent said they would make a home
        improvement over the next three months, down from 24 percent in July.
 
     "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
 continued.
 
     Survey Methodology
     Penn, Schoen & Berland (PSB) conducted approximately 400 interviews among
 a representative nationwide sample of affluent individuals between Sept. 27,
 2004 and Oct. 8, 2004.  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%.
 
     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 (NYSE:   KEY), 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 from 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.
 
 

SOURCE KeyCorp
    CLEVELAND, Oct. 25 /PRNewswire-FirstCall/ -- Economic confidence among
 affluent Americans regarding the overall state of the economy dropped 13
 points from July 2004, representing a major decline and the first since April
 of 2003 -- according to the latest quarterly McDonald Financial Group Affluent
 Consumer Confidence Index results, released today.  The decreased optimism was
 based on strong uncertainty among the affluent about the economy, fueled by
 concerns about Iraq, terrorism, energy prices, unemployment, interest rates
 and a perceived real estate bubble -- many of the key issues in the upcoming
 Presidential elections.
     The overall score for the October McDonald Financial Group Affluent
 Consumer Confidence Index was 48 out of 100 -- a 13-point (or 21 percent)
 decrease since the last survey in July (61).
     In a sharp rise from last quarter, 42 percent of affluent Americans
 surveyed believe the economy is headed in the wrong direction, compared with
 only 23 percent who said so in July.  In a 19-point decline from July
 (72 percent), 53 percent said the economy is headed in the right direction.
     David Legeay, senior vice president, McDonald Financial Group, said, "For
 the first time since our survey's debut, we are seeing a major decline in
 affluent consumer confidence.  As the presidential election draws closer and
 topics like Iraq, terrorism and the economy are at the forefront of news
 coverage and campaign issues, the affluent appear to be increasingly concerned
 and uncertain about the economy.  I would note, by way of context however,
 that while these results are sobering, confidence levels are relatively the
 same as they were back in October of 2003 when the affluent had become
 increasingly optimistic after gains in the stock market, tax cuts and job
 increases."
     Douglas Schoen, a partner with Penn, Schoen & Berland -- the firm that
 conducted the actual polling for the MFG survey -- said, "We think the
 findings of this survey are particularly significant on the eve of the
 presidential election as the affluent are known to vote in strong numbers. In
 fact, 96 percent of survey respondents said they would vote in the 2004
 election, while 93 percent said they voted in the last election.
 Additionally, 51 percent of affluent Americans say they are much more
 interested in the current election than they were in the 2000 Presidential
 election."
     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 Sept. 27, 2004 and
 Oct. 8, 2004, representing the eighth 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.
 
     Affluent Very Uncertain About Current and Future Economy
 
     The decline in economic confidence among affluent Americans was revealed
 by several key survey findings about the current and future state of the
 national economy:
 
      * Forty percent of affluent Americans said the economy was "excellent" or
        "good" compared with 60 percent who said the economy is "fair" or
        "poor," a significant drop since last quarter, when 53 percent rated
        the economy as "excellent" or "good" and 48 percent replied "fair" or
        "poor."
      * Seventy-six percent surveyed said they were concerned about the current
        state of the economy versus 23 percent who said they were not
        concerned, representing a significant increase from the July survey in
        which 64 percent said they were concerned and 35 percent said they were
        not concerned.
      * Forty-two percent expect the economy to get better over the next three
        months, a reversal from the 57 percent who said so in July.
      * The percentage of those who believe the economy will get worse over the
        next quarter rose from 6 percent in July to 13 percent in the current
        survey.
 
     Legeay added, "Although this quarter's survey results revealed a sharp dip
 in affluent Americans' confidence, we advise clients to remember that this is
 roughly where confidence levels were a year ago and to keep the longer horizon
 in mind. We firmly believe that sound financial strategies integrate all
 aspects of wealth -- banking, trust and investments -- and are built on long-
 term objectives and the ability to stay the course while making tactical
 adjustments, not around reactions to short-term fluctuations and uncertainty."
 
     Uncertainty Fueled by Concerns About Iraq, Terrorism, Energy Prices,
 Unemployment, Interest Rates and Real Estate Bubble
 
     This quarter's MFG survey also saw increases in concerns over Iraq,
 terrorism, energy prices, unemployment, interest rates and a housing bubble --
 all key issues on which the overall affluent consumer confidence decline was
 based.  Major findings include:
 
     Iraq/Terrorism:
 
      * More respondents (27 percent) see Iraq as the top issue facing the
        country today than ever before.
      * Half of affluent Americans say Iraq (27 percent) and terrorism
        (23 percent) are the most important issues facing the country, compared
        with the economy (14 percent) and unemployment (3 percent).
      * When asked how the war in Iraq will affect the U.S. economy four years
        from now, 39 percent surveyed said "significantly" or "very
        significantly."  Twenty-five percent said "not at all."
      * More than a third (36 percent) believe the situation in Iraq will
        contribute to a sluggish economy over the next four-year Presidential
        term.
      * Fifty-five percent of respondents say they are concerned that a damaged
        American image abroad due to the Iraq war will hurt U.S. international
        business.
 
     Energy prices:
 
      * Nearly 7 in 10 (67 percent) respondents believe that higher energy
        prices pose a major concern for U.S. businesses, a 10-point increase
        over last quarter (57 percent).
      * Compared to last quarter, the number of affluent Americans who say they
        are "very concerned" with gas prices jumped 16 points to 40 percent.
 
     Employment picture:
 
      * The survey saw a 12-point increase in those who say "jobs are hard to
        get" (37 percent compared to 25 percent who said so in July).
      * The percentage of those who say "jobs are plentiful" dropped 12 points
        to 23 percent from 35 percent in July.
      * The percentage of business leaders saying they will increase hiring in
        the next three months is down 17 points (to 17 percent from 34 percent
        in July).
 
     Interest rates:
 
      * Half of affluent Americans are concerned that expected interest rate
        hikes will negatively impact the economy.
 
     Real estate bubble:
 
      * Real estate bubble fears are at their second highest point in
        7 quarters. Fifty-four percent now believe there is a real estate
        bubble, similar to 56 percent in July.
      * Twenty percent of respondents are moving assets into real estate,
        marking the lowest percentage of people doing so since the survey
        began.
 
     Affluent To Curb Spending and Investing Due to Economic Doubt
 
     The MFG survey revealed that affluent Americans are planning to hold back
 on spending and investing in the stock market due to their uncertainties about
 the economy.
     After increasing last quarter, confidence that the S&P 500 will rise over
 the next three months dropped to its lowest point since the survey began.
 Forty-three percent of respondents believe the S&P will go up over the next
 quarter, compared with 60 percent who said so last quarter.
     As a result, the number of affluent who are investing more in the stock
 market this year compared to last year fell to a six-quarter low of 17 percent
 (down from 24 percent in July). Thirty-six percent say they will invest less
 in the stock market, up from 26 percent who said so in July.
     Intentions to invest in the stock market over the short term are also at
 their lowest point since the survey began, with 36 percent saying they will
 invest less over the next three months (versus 25 percent in July) and 18
 percent saying they will invest more in the market (down from 23 percent in
 July).
     Additional survey findings on curtailed spending intentions include:
 
      * For the second quarter in a row, intentions to plan a vacation
        requiring air travel in the next three months declined and are at their
        lowest levels since the survey began.  Forty-six percent of affluent
        Americans plan to take a vacation by air in the next three months.
      * The intent to purchase high value collectibles has declined 6 points to
        4 percent, on par with its lowest level in the survey.
      * After remaining stable (at about 20%) over the last five quarters, the
        percentage of respondents in the October survey indicating they are
        planning to purchase a car in the next three months declined to 9
        percent -- the lowest point since the survey's inception.
      * Plans to purchase a second home in the next three months are down
        7 points to 5 percent (from 12 percent in July).
      * Intentions to make a home improvement have dipped to their lowest point
        since the survey began. Fourteen percent said they would make a home
        improvement over the next three months, down from 24 percent in July.
 
     "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
 continued.
 
     Survey Methodology
     Penn, Schoen & Berland (PSB) conducted approximately 400 interviews among
 a representative nationwide sample of affluent individuals between Sept. 27,
 2004 and Oct. 8, 2004.  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%.
 
     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 (NYSE:   KEY), 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 from 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.
 
 SOURCE  KeyCorp

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