Investors Still Optimistic About Long-Term Performance of Stock Market

by David W. Moore

Majority expects full recovery to 11,000 level within two years

GALLUP NEWS SERVICE

PRINCETON, NJ -- Looking ahead to next year and into the future, investors remain mostly optimistic about the stock market, according to the latest UBS/Gallup Index of Investor Optimism. Although the current Index is at a record low, a majority of investors expect the market to be higher next year than it is now, and to make a complete recovery to trading at the 11,000 mark or higher within the next two years.

The survey was completed July 14, before last Friday's nearly 400-point drop, but still after the market dropped below the 9,000 level. The monthly poll of investors shows that 56% think the stock market will be higher a year from now, while just 9% expect it to be lower. Another third expect no change.

Investors Predict: A Year From Now, Stock Market Will Be --

After the Sept. 11 terrorist attacks, optimism about the stock market surged dramatically, apparently part of the larger rally-around-the-flag response that characterized that period. And for seven months, about seven in 10 investors continued to believe the stock market would be higher in a year, and only about one in 20 expected the market to be lower. While the number of optimistic investors has declined in the past three months, and is now at the same level as before the terrorist attacks, the results still show that a majority of investors expect the market to increase next year.

These numbers are reinforced by a question that asks investors to predict the stock market's rate of return. On average, investors predict a return of 7.3% on investments over the next year. This is the lowest level in 10 months (it was just 6.3% in September of last year), but still suggests that investors are quite optimistic about the stock market over the next year.

Investors' Expectations for Return .from Stock Market Over Next 12 Months

As the preceding graph shows, there was a surge in expectations after the Sept. 11 attacks, reaching a high of 10.4% last March. Despite the decline in the past several months, investors still seem optimistic about the expected return on stock market investments.

Majority of investors expect full recovery within two years

Another indication of investor optimism about the stock market is that 53% of investors expect the Dow to hit the 11,000 level again within the next two years. And 70% expect that level of recovery within three years.

How Long Until the Dow Reaches
the 11,000 Mark Again?
July 1-14, 2002

A slim majority of all investors expect a full recovery within the next two years. But when thinking about a full recovery over a longer time period, investors with over two decades of experience in investing are more likely than less experienced investors to be optimistic.

Expectations for Full Stock Market Recovery:.Compared by Investor Experience
July 1-14, 2002

As shown in the preceding chart, 75% of the most experienced investors expect the Dow to recover to 11,000 in the next three years. Seventy percent of investors with six to 20 years of experience expect full recovery that quickly, as do 66% of investors with five years of experience or less.

Methodology

The results reported here are based on telephone interviews with a randomly selected national sample of 1,002 adult investors, 18 years and older, with at least $10,000 of investable assets, conducted July 1-14, 2002. For results based on this sample, one can say with 95 percent confidence that the maximum error attributable to sampling and other random effects is plus or minus 3 percentage points. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

A year from now, do you think the stock market will be higher than it is now, lower, or about the same? (Probe for "much higher" or "somewhat higher"; probe for "much lower" or "somewhat lower.")

 

Much higher

Somewhat higher

About the same

Somewhat lower

Much lower

Don't know/ Refused

%

%

%

%

%

%

02 Jul

7

49

33

7

2

2

02 Jun

4

57

32

3

1

3

02 May

5

56

33

4

*

2

02 Apr

6

62

26

3

1

2

02 Mar

7

66

22

3

1

1

02 Feb

8

61

26

4

1

*

02 Jan

9

61

25

3

1

1

01 Dec

11

57

25

5

1

1

01 Nov

11

59

22

5

2

1

01 Oct

13

58

23

3

1

2

01 Sep

7

50

31

9

2

1

01 Aug

5

48

36

7

1

3

01 Jul

8

48

34

7

1

2

01 Jun

6

48

35

8

1

2

01 May

10

48

32

7

2

1

01 Apr

8

50

32

6

2

2

01 Mar

6

47

34

10

1

2

01 Feb

7

43

38

9

2

1

01 Jan

5

46

35

8

3

3

00 Dec

7

39

32

14

4

4

00 Nov

5

40

41

10

2

2

00 Oct

5

38

41

11

2

3

00 Sep

4

40

44

8

*

4

00 Aug

6

43

37

9

1

4

00 Jul

5

43

39

8

2

3

00 Jun

2

45

37

10

2

4

00 May

4

45

37

10

1

3

00 Apr

7

45

34

11

1

2

00 Mar

5

38

38

15

2

2

 

 

The last time the Dow Jones Industrial Average hit the 11,000 mark was in June of 2001. About how long do you think it will be before the Dow Jones Industrial Average reaches that level again?

 

Within the next 6 months

 

Within the next year

Within the next 2 years

Within the next 3 years

More than 3 years

Never reach that level again

Don't know/ refused

02 Jul

4%

16

33

17

21

4

5

 

* -- Less than 0.5%

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Gallup http://www.gallup.com/poll/6466/Investors-Still-Optimistic-About-LongTerm-Performance-Stock-Market.aspx
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