Bulls and Bears of the Stock Market

There has been a gradual increase in positive sentiment about economic conditions across the country. The percentage of Americans saying that economic conditions are getting better is up in early June, continuing a four-month upward trend, and we now have a situation in which slightly more Americans say the economy is getting better than say it is getting worse.

But, that uptick in general optimism doesn't appear to have translated into any type of major psychological shift in Americans' sentiments about the stock market, despite its recent climbs. According to a June 9-10 Gallup Poll, just 41% of Americans say it's a good time to invest $1,000 in the stock market, while 57% say it would be a bad idea. This gives us a net "bullish index" of -16%.

If you had a thousand dollars to spend, do you think investing it in the stock market would be a good or bad idea?

 

	Good idea	Bad idea	DEPENDS (vol.)	No opinion
	%	%	%	%
2003 Jun 9-10	41	57	1	1
2003 Apr 7-9	34	63	2	1
2002 Jul 29-31	37	58	3	2
2002 Jul 22-24	31	63	3	3
2002 Jun 21-23	45	51	2	2
2002 Apr 8-11	47	48	3	2
2001 Apr 6-8	42	53	2	3
2001 Jan 10-14	42	53	3	2
2000 Dec 2-4	46	49	2	3
2000 Oct 13-14	57	36	2	5
2000 Jan 7-10	67	28	2	3
1999 Oct 21-24	51	44	2	3
1999 Sep 10-14	60	33	3	4
1999 June 4-5	60	34	3	3
1999 Mar 12-14	59	35	3	3
1998 Sep 1	46	48	3	3
1998 Apr 17-19	65	28	4	3
1997 Oct 30	46	47	3	4
1997 Oct 27	53	43	1	9
1997 Jul 25-27	62	33	1	4
1994 Mar 9-10	38	46	9	7
1990 Feb	26	68	2	4

Although that's a slightly more positive response than we've seen over the last year, it's still not the level of optimism some might expect given the 25% increase in the Dow since March. And it's downright bearish compared to the recent boom years. At points in 1998 and in 2000, for example, almost two-thirds of the public said it would be a good idea to put $1,000 into the market.

The relative bearish prevailing sentiment today may actually be quite rational, given past experience. But many Americans obviously thought back in January 2000 that the market was going to continue its upward climb, so much so that a bullish 67% said that it was a good idea to invest in the market. Then, of course, the market took its deep, deep nosedive and many Americans were severely burned. It's apparently going to take more than the current three-month rally in the stock market to put Americans back in a full "bull" mode again -- at least psychologically.

There are major differences in bullish sentiment among various subgroups of the U.S. population. Not surprisingly, Americans who already own stock -- about 61% of the adult population according to our Gallup estimates -- are more positive than those who don't. Indeed, Americans who don't own stock are fairly strong in their desire to keep whatever excess money they may have under the mattress or in CDs. A full 73% of those who don't own stock say that investing $1,000 in the market now would be a bad idea.

Americans with annual incomes of $75,000 or more have a net +13% bullish index, compared to a -40% among those with an annual income of less than $20,000.

There are big differences by age. The youngest group of Americans in our poll (18- to 29-year-olds), and older Americans 65 and older are least bullish, while middle-aged adults between 30 and 64 are more upbeat about the market. The -37% bullish index among those aged 65 and older may help explain why this group is the least interested in new Social Security plans that involve personal investment plans.

But the most fascinating difference in market sentiments is between men and women.

Women are much more conservative than men in their approach to the market. Only 32% say that now would be a good time to put $1,000 in the market, while 66% say it would not. That's a net bullish index of -34%, compared to the +1 we find for men. Older women are the most bearish of all; 70% of women aged 50 and older say it's a bad time to invest in the market, giving them a net bullish index of -42%. Men older than 50 years of age, in stark contrast, have a -3% index value.

Why is this the case? Certainly men -- particularly older men of the pre-baby boom generation -- are perhaps more likely to have been involved in the markets and are more used to them. Men may also be answering the question in a bullish fashion because they are interested in presenting a macho, daring image. Older women are more likely to be widows and conservative with their money. Women may be more cautious in general, regardless of their age.

These age and gender patterns in sentiment about the stock market are not new. We can compare the current demographic differences to those in January 2000, when -- as noted above -- 67% of Americans said it was a good time to invest $1,000 in the market, and 28% said it was not.

If you had a thousand dollars to spend, do you think investing it in the stock market would be a good or bad idea?
	January 2000			June 2003
	Good idea	Bad idea	Difference	Good idea	Bad idea	Difference
Total	67%	28%	+39	41%	57%	-16
Men	73	24	+49	49	48	+1
Women	61	33	+28	32	66	-34
18 to 29	69	29	+40	39	60	-21
30 to 49	70	25	+55	45	53	-8
50 to 64	69	26	+43	42	55	-13
65+	54	38	+16	30	67	-37
18 to 49 Men	73	25	+48	51	47	+4
18 to 49 Women	66	29	+37	36	63	-27
50+ Men	74	22	+52	46	49	-3
50+ Women	54	38	+16	28	70	-42

The bullish index in 2000 for men was +49, while it was +28 for women. That's a 21-point gender gap, smaller but not hugely different from the current 35-point gap. Similarly, there was a +40 bullish index for 18- to 29-year-olds in January 2000, compared to +16 for those 65 and older. That's a gap of 24 points, while today the gap is +16 percentage points.

Finally, it can be seen that older women were the most downbeat about the market in 2000, just as they are today. Of course, the caution three years ago of women aged 50 and older was quite appropriate, given what happened to stocks, which perhaps gives their lack of confidence in the market today a little more legitimacy.