Southland Investors Bullish on Economy
Buoyed by stellar stock market gains and a strong economy, most Southern Californians are notably upbeat about their personal finances and think the stock market will not be hurt by temporary setbacks like the Asian financial crisis, a new Los Angeles Times poll has found.
In one illustration of their positive feelings, 46% of Southland residents who own stock think that the Dow Jones industrial average will shake off Asia’s woes and rise this year, while 31% say it will stay the same. Only 17% say it will fall. What’s more, 85% of stock owners say they’re in the market for the long term, and 76% say no event would force them out.
Overall, The Times’ second annual investor poll--done in conjunction with its Investment Strategies Conference that begins Saturday--shows that Southland residents are confident about their personal finances, with 69% describing their financial pictures as “secure” and only three in 10 saying they’re “shaky.” Further, 33% of respondents said they will have more money to spend this year than last year, versus 20% who said they would have less to spend.
The optimism reflects in part consumers’ reactions to a recent stream of positive economic news that includes the national unemployment rate falling to near a quarter-century low and surging home sales. The poll found that the percentage of people who believe the state is going in the right direction is at its highest level since The Times began querying Southland residents about the topic in 1991. In fact, their confidence has jumped significantly in the last three months, the poll showed.
The positive attitude also underscores the extent to which many people have become convinced that the stock market may offer the best returns over the long term despite its periodic gyrations.
“People are feeling good about everything and it permeates all aspects of their lives,” said Times Poll Director Susan Pinkus. “People are not hearing gloom-and-doom news. They’re hearing upbeat reports from government officials, and that’s making them feel confident.”
The survey, which was conducted Jan. 10-13 and has a sampling error of plus or minus 3 percentage points, asked 1,207 Southern Californians a wide range of questions about their personal finances.
Not surprisingly, confidence in the stock market is higher among people who own stock or follow the market closely, the poll found. Overall, 36% of respondents said they own stock in the form of either individual securities, mutual funds or 401(k) retirement accounts. That’s in line with earlier polls.
Only one-fourth of Southlanders say they follow the market “somewhat” or “very” closely. Nearly half of women don’t follow the market at all, while 39% of men don’t track it. Only 44% of those who own stock say they follow the market closely.
Still, the belief in the market’s prospects is all the more notable considering that the polling started the day after the Dow Jones industrial average slumped 222 points because of worries about Asia. Nevertheless, that and other brief drops have done nothing to dim Southlanders’ enthusiasm.
“You have to ride these things out,” said Julia Bacon, a 42-year-old tax auditor from Covina and a poll respondent, echoing the thoughts of others. “It’s not a short-term investment.”
Wall Street experts have long worried that individual investors will panic and sell out when the market undergoes a prolonged downturn, not only inflicting deep losses on themselves but also exacerbating any slide by withdrawing their increasingly substantial holdings.
But that wasn’t the case when the Dow plunged 554 points in one day in late October.
Three-quarters of respondents said the mini-crash didn’t alter their views of whether the market is safer or riskier. A full 75% of stock owners said they did nothing on Oct. 27, 13% said they bought more stock and 3% said they sold.
The market’s recovery the next day, when the Dow took back 337 points, encouraged Dionne King, a 29-year-old Garden Grove homemaker and poll respondent.
“The stock market proved itself by coming back up,” she said. “. . . We put our money in there and we don’t touch it.”
However, the October sell-off convinced 18% of respondents that the stock market is now a riskier place to invest, compared with the 2% who said it’s safer.
And some experts still doubt small investors’ staying power. Because the market rebounded so quickly, they say many people still haven’t had their patience truly tested. Indeed, the Standard & Poor’s 500 index of blue-chip stocks hit a record high Tuesday to continue a rally that began three weeks ago.
They also say that bullish sentiment about either the market or the economy is a lagging indicator. Far from spotlighting what may happen in the future, such enthusiasm is just a reflection of what has gone on in the past.
The elderly appear to be the least worried that the market’s volatility will upset the economy. A full 64% are not worried about recent events and 57% doubt the market will crash within the next three years.
Harold Ahrens, a 67-year-old retired aerospace industry computer operator and poll respondent, said he doesn’t panic when the market slides because it has always come back over time.
“I just figure in the long run it’ll grow and I don’t worry about it,” he said.
One-third of Southern Californians who own stock say they’ll invest more this year than last year. In that vein, 19% of people said they have money market accounts, compared with 29% who had them a year ago. That may show that more investors are pouring their money into the stock market rather than brief parking spots like money market accounts.
Almost three-quarters of people who own stock say the value of their stock portfolios has risen in recent years. But despite the rising values, Southlanders don’t feel wealthier. Of those whose portfolios have risen, 69% said they don’t feel like they have more money to spend. An additional 4% say they have a lot more and 13% say a fair amount more.
In a sign that Southlanders may be planning more diligently for retirement, the percentage of people who reported having 401(k) accounts rose to 36%, from 28% last year.
The optimism about stocks carries over to Southlanders’ perceptions of the economy.
Queried about their overall feelings on the state, 57% said California is heading in the “right direction,” compared with 30% who felt it’s “seriously off on the wrong track.” That’s the highest satisfaction level in the seven years The Times has asked that question. More notably, it’s a marked rise from a late October poll in which 47% of people felt positive about the state and 39% were negative.
Not surprisingly, 73% of affluent Southlanders, defined as those earning more than $60,000 a year, like the path the state is on. But even 47% of those taking home less than $20,000 annually feel that way, the poll shows. Asked specifically about the state economy, 54% think it’s robust while 42% who say it’s shaky.
When asked if anything worries them about their current financial situations, a fifth said nothing concerns them and 12% said they feared losing their jobs. That’s down from the 19% who feared a job loss three months earlier.
A complete report on the poll results can be found on The Times’ Web site at https://www.latimes.com/HOME/NEWS/POLLS/
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A Positive Outlook
Most Southern California residents express confidence in the stock market despite recent undulations and financial turmoil in Asia.
How much confidence do you have that the stock market will do well over the next 12 months?
A great deal or some: 54%
Very little or none: 28%
Don’t know: 18%
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Have recent events in the stock market and in Asian markets made you nervous about the U.S.’s economic stability?
Not too nervous or not nervous at all: 58%
Very nervous or somewhat nervous: 37%
Don’t know: 5%
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MORE COVERAGE
* Special section: Tips on becoming a more savvy investor. Business Part II
* Stock market: Optimism pushes Dow up more than 200; S & P 500 tops 1,000 mark. D1
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How the Poll Was Conducted
The Times Poll contacted 1,207 adults in Southern California by telephone Jan. 10-13. Telephone numbers were chosen from a list of all exchanges in Los Angeles, Orange, San Diego, Ventura, Riverside and San Bernardino counties. Random-digit dialing techniques were used so that listed and non-listed numbers could be contacted. The sample was weighted slightly to conform with census figures for sex, race, age, education and region. The margin of sampling error for all adults is plus or minus 3 percentage points; for certain subgroups the error margin may be somewhat higher. Poll results can also be affected by other factors, such as question wording and the order in which questions are presented. Interviews were conducted in both English and Spanish.
