A year and a half of market malaise is beginning to wear investors down.
Investor optimism sank to its lowest level in almost five years this month as the nation's sluggish economy and shrinking corporate profits rattled the stock market, according to a poll by brokerage UBS PaineWebber Inc. and research firm Gallup Organization.
Only 40% of Americans expressed optimism over the stock market in the monthly Index of Investor Optimism poll, down from 45% 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 pickup 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 we 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, the benchmark for judging performance of professional investors and mutual funds, is down almost 10% in 2001.
More investors--28% in July from 22% 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% believed they would miss their targets one year ago, the study said.
The poll had a sampling error of plus or minus 3 percentage points.
Investors suggested tax rebates will do little to boost the market or the economy. Indeed, 42% of those who think they will receive a rebate plan to save the money and 29% will use the rebate to pay off debt, the study said. Just 17% said they will make a special purchase, and only 8% plan to invest the rebate in stocks, the poll showed.