Investor optimism sinks to almost five-year low-poll
NEW YORK, July 23 (Reuters) - Investor optimism sank to its lowest level in almost five years in July as the nation's sluggish economy and shrinking corporate profits rattled the stock market, according to a poll by brokerage UBS PaineWebber Inc. and the Gallup Organization research firm.
Only 40 percent of Americans expressed optimism over the stock market in the monthly poll -- dubbed the ``Index of Investor Optimism'' -- down from 45 percent last month. The index, which was established in October 1996 with a baseline of 100, plunged to 82 in July from 104 last month as investors failed to see signs of a pick-up on Wall Street.
``Investors have been hearing a lot about Federal Reserve policy and interest-rate cuts and how they are going to help portfolios and the economy. Here were are six months later and nothing has happened,'' said Tracy Eichler, an investment strategist at UBS PaineWebber. ``What investors need to realize is that it usually takes six months to hit the economy ... Maybe it hasn't happened fast enough for investors.''
The Fed has ratcheted down interest rates six times since the start of the year to kick-start the economy. Lower borrowing costs encourage consumers to pull out their wallets and companies to go ahead with big-ticket purchases.
But the Standard & Poor's 500 index (^SPX - news), the benchmark for judging performance of professional investors and mutual funds, has dropped about 9 percent in 2001. The technology-packed Nasdaq composite index (^IXIC - news) has lost roughly 20 percent of its value, and the blue-chip Dow Jones Industrial Average (^DJI - news) has shed about 3 percent this year.
More investors -- 28 percent in July from 22 percent in June -- are doubting they will hit their 12-month investment targets as the stock market heads south, according to the poll of 1,000 investors across the nation. Just 13 percent believed they would miss their targets one year ago, the study said.
The poll had a sampling error of plus or minus three percentage points.
Investors suggested tax rebates would do little to boost the market or the economy, according to the poll. Indeed, 42 percent of those who think they will receive a rebate plan to save the money, while 29 percent would use the rebate to pay off debt, the study said. Just 17 percent said they will make a special purchase, and only 8 percent expect to invest the rebate in the markets, the poll showed.
``Where people are thinking it's a one-time shot, we have to realize this is a 10-year plan of tax-cutting,'' Eichler said. ``People are focusing on the fact that, 'Well, I am going to get $300 to $600 and that's it.' We need to educate the public that this will eventually help the economy.''
Indeed, Eichler thinks the time is ripe for investors to place their money in the stock market as interest-rate and tax cuts filter through the economy.
``We hopefully will see a rebound in corporate earnings in the fourth quarter,'' Eichler said. ``It's setting ourselves up for a very sweet spot in the market place. Instead of focusing on day-to-day moves, if I look out 12 months I am going to be happy I am in the stock market.'' |
