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Bw/Harris Poll: The Bull Slows To A Trot


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BW/Harris Poll: The Bull Slows to a Trot

A year ago, optimism was high in the annual BUSINESS WEEK/Harris Poll of investors. Fully 52% of respondents thought stocks would go up in the year ahead, many more than in the three previous years. How wrong they were: Wall Street is headed toward its worst year since 1990. Now, chastened, only 32% of poll respondents expect stocks to rise, the lowest figure in the five years the question has been asked. Are they right this time? Or does their pessimism mean that the market is oversold, setting the stage for an enormous rally?

The value of the BUSINESS WEEK/Harris Poll is the insight it gives into investors' thinking. For instance, this year's poll helps explain why so many people are still pumping money into stocks--when so few expect the market to go up in 2001. Apparently, it's because many think they have a talent for picking winners. We asked investors if they thought they could beat the market. Some 79% said they were very or somewhat confident they could, vs. just 3% who weren't.

The stock market's bad year seems to have influenced investors in other ways as well. Slightly fewer thought stocks were overpriced at current levels. Investors were also a little less worried about turbulence: The numbers expecting less stock market volatility in the year ahead more than doubled, from 11% in 1999 to 24% this year.

But people have lost a bit of confidence about likely long-term returns from stocks. Some 40% thought total returns would be less than 10% a year, a figure that has risen steadily from a low of 31% in 1997. The share of people expecting returns of 15% or more has correspondingly shrunk, to 24%.

Despite the collapse of Internet stocks, 25% continued to believe such issues are very overpriced, down from 33% last year. Only 8% thought they were somewhat or very cheap. Views on the overall stock market shifted little, with 11% saying the market was overpriced, compared with 12% last year.

One last thing: Without getting specific, we asked people between Nov. 28 and Dec. 4, in the midst of the Florida election dispute, how they thought "the political situation in Washington" would affect the stock market over the next year. Some 30% thought the effect would be positive, 38% said it would be negative, and 18% believed there would be no effect at all.By Peter CoyReturn to top

TABLE

Business Week/Harris Poll (extended)

BEST INVESTMENT

If you had to choose the one investment that you think would be the best to

make right now, which would it be?

1989 1996 1997 1998 1999 2000

Real estate 40% 25% 33% 30% 30% 28%

Mutual funds 8% 24% 21% 18% 20% 21%

Bank or savings

& loan deposits 8% 8% 9% 11% 12% 14%

Common stock 5% 10% 12% 13% 13% 8%

Money market

funds 11% 6% 6% 7% 7% 8%

Gold or other

precious

metals 8% 7% 4% 4% 5% 4%

Government

bonds 15% 9% 5% 5% 5% 5%

Corporate

bonds 3% 2% 4% 3% 2% 1%

Don't save/Not

sure/Decline to

answer 2% 9% 6% 9% 5% 10%

WHERE'S YOUR MONEY?

Thinking about your household's total assets including real estate, stocks

(including stock mutual funds), bonds (including bond mutual funds), savings

instruments, and cash, does your household own any of the following?

NOT SURE/

DECLINE TO

YES NO ANSWER

Real estate 1999 62% 34% 4%

2000 59% 32% 9%

Stocks (including stock mutual funds)

1999 50% 46% 4%

2000 47% 42% 11%

Bonds (including bond mutual funds)

1999 28% 67% 5%

2000 27% 61% 13%

Savings instruments and cash

1999 74% 23% 3%

2000 67% 21% 12%

Some other asset 1999 22% 74% 4%

2000 34% 55% 12%

BULLS OR BEARS?

Over the next year, do you think stocks will go up, stay about the same, or go

down?

1996 1997 1998 1999 2000

Go up 39% 39% 37% 52% 33%

Stay about the same 36% 38% 34% 20% 26%

Go down 19% 16% 21% 17% 23%

Not sure/Decline to answer 6% 7% 8% 10% 19%

IS A CRASH COMING?

Over the next 12 months, how would you rate the chance of another big crash in

the stock market -- very likely, somewhat likely, not very likely, or not at

all likely?

1996 1997 1998 1999 2000

Very likely 12% 13% 14% 15% 13%

Somewhat likely 35% 43% 41% 37% 37%

Not very likely 35% 31% 29% 33% 35%

Not likely at all 15% 10% 11% 11% 7%

Not sure/Decline to answer 3% 3% 4% 4% 8%

REMAINING QUESTIONS ASKED

ONLY OF STOCK INVESTORS

PERSONAL PLANS

Over the next six months, do you think you will probably invest a lot more in

stocks or stock mutual funds, invest somewhat more in stocks or stock mutual

funds, reduce your investment in stocks or stock mutual funds somewhat, or

reduce your investments a lot?

1999 2000

Invest a lot more 10% 7%

Invest somewhat more 37% 35%

Reduce somewhat 10% 13%

Reduce a lot 5% 5%

Stay the same (vol.) 29% 32%

Don't invest/Not sure/

decline to answer 10% 7%

WHAT CAN YOU EXPECT FROM STOCKS?

In the long run, what sort of total returns (capital gains plus dividends) do

you expect the stock market to produce for you--below 5% a year, 5% to below

10% a year, 10% to below 12% a year, 12% to below 15% a year, or 15 % or

higher a year?

1996 1997 1998 1999 2000

Below 5% a year 8% 4% 9% 7% 7%

5% to below 10% a year 36% 27% 26% 30% 33%

10% to below 12% a year 29% 30% 29% 27% 25%

12% to below 15% a year 13% 19% 18% 14% 12%

15% or higher a year 9% 14% 17% 13% 12%

Not sure/Decline to answer 5% 5% 2% 10% 11%

THINK YOU CAN BEAT THE MARKET?

How confident are you that the stocks or mutual funds you pick will beat the

market averages -- very confident, somewhat confident, not very confident, or

not at all confident?

2000 2000

Very confident 17% Not at all confident 3%

Somewhat confident 62% Not sure/Decline to answer 6%

Not very confident 12%

VALUATION OF STOCKS OVERALL

Overall, how would you describe the stock market's valuation -- very

overpriced, somewhat overpriced, fairly valued, somewhat cheap, or very cheap?

1999 2000

Very overpriced 12% 11%

Somewhat overpriced 46% 40%

Fairly valued 31% 28%

Somewhat cheap 4% 9%

Very cheap * 1%

Not sure/Decline to answer 7% 11%

INTERNATIONAL STOCK PRICES

Overall, how would you describe the valuation of international stocks -- very

overpriced, somewhat overpriced, fairly valued, somewhat cheap, or very cheap?

1999 2000

Very overpriced 6% 7%

Somewhat overpriced 22% 23%

Fairly valued 19% 17%

Somewhat cheap 11% 10%

Very cheap 1% 2%

Not sure/Decline to answer 41% 41%

INTERNET STOCK PRICES

Overall, how would you describe the valuation of Internet stocks -- very

overpriced, somewhat overpriced, fairly valued, somewhat cheap, or very cheap?

1999 2000

Very overpriced 33% 25%

Somewhat overpriced 27% 27%

Fairly valued 14% 11%

Somewhat cheap 4% 4%

Very cheap 1% 4%

Not sure/Decline to answer 22% 29%

TECHNOLOGY STOCK PRICES

Overall, how would you describe the valuation of technology stocks -- very

overpriced, somewhat overpriced, fairly valued, somewhat cheap, or very cheap?

2000 2000

Very overpriced 18% Somewhat cheap 6%

Somewhat overpriced 35% Very cheap 1%

Fairly valued 19% Not sure/Declineto answer 21%

BIOTECH STOCK PRICES

Overall, how would you describe the valuation of biotech stocks -- very

overpriced, somewhat overpriced, fairly valued, somewhat cheap, or very cheap?

2000 2000

Very overpriced 12% Somewhat cheap 5%

Somewhat overpriced 26% Very cheap *

Fairly valued 17% Not sure/Decline to answer 40%

VOLATILITY

Do you believe that next year, the stock market will be less volatile, about

as volatile as this year, or more volatile?

1998 1999 2000

Less volatile 16% 11% 24%

About as volatile as this year 56% 54% 43%

More volatile 26% 28% 24%

Not sure/Decline to answer 2% 7% 10%

THROUGH WHOM DO YOU GET YOUR STOCKS?

In general, through whom do you buy and sell stocks?

1998 1999 1999 2000

Your employer 11% 41% 41% 35%

A full-service, full-price broker 38% 30% 31% 30%

Mutual funds - - * 15%

A discount broker 24% 16% 16% 12%

A bank - - 2% 10%

Directly from the company 24% 13% 14% 7%

Online/own self - - 2% 6%

Other 6% 9% 1% 4%

Do not buy - - 1% 2%

Not sure/Decline to answer 3% 5% 6% 2%

HOW DO YOU TRADE?

In general, how do you buy and sell stocks?

1998 1999 2000

By phone 51% 37% 35%

In person 26% 26% 33%

Through my employer/direct deposit (vol.) 13% 22% 16%

On the Internet 11% 9% 12%

By mail (vol.) 2% 4% 3%

Other 5% 5% 4%

Don't trade/Not sure/Decline to answer 1% 6% 10%

NOTE: In 1998, the item "my employer" was a voluntary response. In 1999 and

2000, this item was read to the respondent. Therefore, the data does not

reflect a true trend. Also in 1999, the items "mutual funds," "a bank," and

"online/own self" were voluntary responses. In 2000, these items were read to

the respondent.

WHAT'S UP WITH POLITICS?

How do you think the political situation in Washington will affect the stock

market over the next 12 months -- very positively, somewhat positively,

somewhat negatively, very negatively, or will it have no effect at all?

2000 2000

Very positively 8% Very negatively 7%

Somewhat positively 22% No effect at all 18%

Somewhat negatively 31% Not sure/Decline to answer 13%

- Indicates zero.

* Indicates less than 0.5%. (vol.) means answer was volunteered.

This survey of 1,026 adults, including 484 stock investors, was conducted from

Nov. 28 to Dec. 4, 2000, for Business Week by Harris Interactive Inc. The

margin of error for stock investor responses is plus or minus 4.5%.

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