Few investors ran from the market bear

When the stock market soared last week after the latest interest-rate cuts, it came as no surprise to American investors. Most of them never lost faith.

While many on Wall Street were gnashing their teeth over the year-long bear market, Main Street hung onto its stocks, its 401(k) investments, and its long-term confidence.

A new nationwide survey finds that only 9 percent of US investors took money out of the market during the past six months, when the outlook seemed darkest.

Most Americans - 58 percent - hung onto their stocks while they waited for the storm to blow over. Another 33 percent said they were at least nibbling at new stock purchases as prices fell.

The Christian Science Monitor/TIPP poll surveyed 459 investors across the nation from April 6 to 10, prior to the latest interest-rate cut by the Federal Reserve Board. Each of those interviewed had at least $10,000 invested in stocks. The survey was taken in conjunction with the Monitor's polling partner, Investor's Business Daily.

Most investors were like Claudia Lowder, a California lawyer, who says that any new money she gets for the time being would go into "something safe like bonds ... and see how it goes."

But Ms. Lowder says she left her previous investments untouched as the market nose-dived during the past year, even though she has "tons" in the market.

Eunice Godwin of Oroville, Wash., says confidently: "I think it's going to improve. I'm an optimist."

Mrs. Godwin and her husband are invested in technology, communications, and energy stocks. She's especially keen on oil and other energy stocks "because I think that's what runs the world."

The Monitor/TIPP survey indicates that 47 percent of Americans have money in the stock market, either in stocks, mutual funds, or investments through retirement plans like an IRA, 401(k), or 403(b).

Clearly, the spread of retirement vehicles like 401k plans has resulted in widespread concern about the sinking stock market. In the near future, a majority of American households are expected to have a stake in Wall Street.

The poll indicated that many current investors are poised to jump back into the market. Looking ahead six months, for example, 40 percent of those surveyed say they expect to put money into stocks. Only 3 percent, on the other hand, plan to sell.

Even so, the market decline has made a serious dent in many portfolios, and has changed the plans of millions of Americans, if this survey is indicative.

For example, nearly one-quarter of those interviewed (24 percent) say that, because of the declining market, they have delayed a major move, such as retirement or a big purchase.

Younger American investors - 53 percent of them - appear to have been hit the hardest. In contrast, only 15 percent of those aged 65 or higher said the market decline had changed their personal plans.

While remaining upbeat, Americans say the past year's stock-market decline was the result of prices reaching too high, too fast. Some 64 percent felt the market had become overvalued prior to the start of the bear market. That was clear when people were buying stocks "with price-earnings ratios in the 90s," says Godwin.

Far fewer (11 percent) blame the Fed and Chairman Alan Greenspan for the market tumble.

Staff writer Steven Savides assisted with this report.

(c) Copyright 2001. The Christian Science Monitor