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.

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