BW/Harris Poll: The Waiting Game

A majority of investors thinks stocks will rise--but that doesn't mean they'll be buying

Investors are nervous and confused after a year in which the stock market crashed and then partially recovered. While they're far more likely than last year to think stocks are a good deal at current prices, they're less prone to stepping up their purchases in the coming six months.

These are some of the key findings in the BusinessWeek/Harris Poll for the annual Investment Outlook. In the portion of the survey that is asked of the general public--not just stock investors--39% picked real estate as the single best investment to make now, up from 28% who felt that way last year. Stocks were the No. 1 pick of just 20%, down from 29% a year ago. That's even though 52% of the general public thinks stocks will go up in the coming year, compared with just 33% who felt that way last year.

Stock investors exhibit the same caution as the public at large. Only 28% say they'll invest more in stocks and mutual funds in the next half-year, down from 42% who said so in 2000. That's surprisingly cautious, considering that only 33% think stocks are overpriced, down from 51% who thought so in last year's poll.

Stock investors have lowered their sights. Fully 54% expect to earn only single-digit returns from stocks in the long run, vs. just 31% who were so pessimistic as recently as 1997. Yet they haven't totally lost their hubris: 76% are somewhat or very confident that their stock and fund picks will beat the market averages.

Tech stocks look like a better bargain to some investors this year, with 21% calling them somewhat or very cheap, vs. only 7% who thought so last year. (To be sure, 46% still think they're overpriced.) International stocks are still a black box: Fully 47% venture no opinion on them at all.

This year, we asked a special question of all respondents, not just stock investors, about how they thought "terrorism and the war against it" would affect the stock market in the coming year. People were evenly split, with 39% predicting a favorable effect and 40% an unfavorable one.

By Peter Coy

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