Poll Analysis: Southlanders Think Economy Is on Upswing

Residents in Southern California are feeling pretty good about the direction in which the state is heading, as well as the robustness of the state's economy, and the future economy in the Southland, according to a new Los Angeles Times Poll. This feeling of satisfaction has risen sharply from three months ago, when 47% of So.Californians said California was heading in the right direction to the current 57% of Southlanders feeling this way (30% wrong track). Since asking the question in December '91, this is the first time there is so much optimism from Southern California residents. The poll interviewed 1,207 Southern California adults, January 10 through 13. The margin of sampling error is plus or minus three percentage points.
     Those who own stock have a rosier picture of the state's economy. Two-thirds of those who own stock think California is headed in the right direction, just 23% say wrong track. This compares to the 52% who don't own stock and say the state is headed in the right direction, while 34% say wrong track.
     About a quarter (23%) of Southern California residents say that 3 months from now the California economy will be better than now, 11% worse and 62% say it will remain the same. Similarly, 21% say the Southern California economy will be better 3 months from now, 10% worse and 65% the same.
     With this newfound optimism, a third of the respondents say they will have more money to spend this year than last year, 44% the same and just a fifth saying they will have less money to spend this year over last year (a combined total of three-quarters saying more or the same).
     Economic Worries: When asked if anything concerns them about their current financial situation, a fifth say nothing concerns them and about another fifth (18%) saying not enough money; 12% fear they will lose their jobs. (In the October '97 poll, 19% said losing their jobs was what concerned them, while 25% said not having enough money.)
     
Investment and Savings

     About a fifth (16%) of Southern Californians say they don't invest or save when asked if they will invest or save more money this year over last year, 26% will invest more, 38% the same amount of money and 18% less (a combined total of 64% say they will invest the same or more money). More men (32%) than women (19%) say they will invest more money, as well as the younger investor compared to the older investor (18-29 years old at 33%; 30-44 years old at 30%; 45-64 years old at 23% and 65 and older at 7%). It is not surprising that the older investor will not invest more money as they are the ones who are already retired and would have less money to spend now since they are beginning to live on their prior investments.
     Two-thirds of white Southlanders say they will invest more or the same amount of money, while 53% of blacks and 57% of Latinos say that. And not surprisingly, the more affluent the respondents, the more they say they will invest more.
     
Where Information Is Obtained About Investing

     Majority say they get information from some media organization (i.e., business magazine, newspaper, television show), while 43% say they don't pay attention to investment information. Overall, One in twenty (5%) Southlanders say they get their information from the Wall Street Journal and 14% from a financial advisor. Four percent said they get their information from an online computer service. But those earning more than $60,000 say they get their investment information from many different avenues -- their financial advisor (22%), the Los Angeles Times (18%), and the Wall Street Journal (12%). Those who follow the stock market closely are also more interested in obtaining information from many different sources. They get their information from the L. A. Times (19%), their financial advisor (19%), their local paper (15%) and the Wall Street Journal (13%).
     Along these lines, 41% say they have access to an online service, such as America Online. Southern Californians having access to these services has increased by 10 points from last year's survey. This is becoming an increasingly popular way of investing -- it is easy and less intimidating to a beginning investor. Of those who have access, 30% say they use the online service for such things as buying and selling of stock (4%), tracking their investments (15%), reading about updates in different markets and investment newsletters (16%).
     
Overall Attitudes About Stock Market

     Only a quarter of Southlanders say they follow the stock market very or somewhat closely, three-quarters say not too closely or not at all. Nearly half (49%) of women say they don't follow the market at all, compared to 39% for men. More of the younger cohort don't follow the market at all (51%), compared to 40% of respondents 45 and older.
     There is confidence that the stock market will do well over the next twelve months, 54%, compared to 28% who say very little or no confidence. Only 1 in 11 say no confidence at all.
     Two-thirds who follow the stock market closely have faith in the market, as do whites (58%) and the more affluent (66%). Even the 38% who say there is a likelihood of a stock market crash within the next three years is also confident that the market will do well within the next 12 months (53%). People aren't as afraid of the swings in the market as they once were and small investors appear to be in it for the long haul. For instance, when the Dow made a big correction on January 9, (the day before we polled) dropping by 250 points, the small investors didn't panic and start selling their shares.
     Along with confidence in the market and even with the recent developments in the market, including the 250 point drop in the Dow on Friday, 1/9, and the recent decline in the Asian markets, almost 3 in 5 Southlanders are not nervous about the country's economic stability. Only 7% say very nervous, while 31% say not at all. The more the respondents are familiar with the market, (watching the market closely, heard about the October '97 correction, less likely to think the market will crash) the less nervous they are about the day-to-day developments and corrections of the market. Sixty-three percent of those closely following the market, 73% who say it's not likely the market will crash, and 65% who heard about the October correction are not nervous about the economic stability of the country because of the stock market's recent developments. Almost two-thirds of the elderly seem to be the most patient about the daily twists and turns and volatility of the market (this includes their feelings about: 64% are not nervous about the recent events, and 57% say it is not likely the market will crash in the next three years.). The respondents earning less than $20,000 are divided over being nervous and not nervous (47%-43%) as are Latinos (46%-50%).
     A sizable majority (58%) say they had heard of the October correction where the market dropped over 500 points, but rallied over the next several days. The poorer respondents, earning less than $20K, Latinos, and the younger respondents have not heard of the October correction in somewhat higher proportion.
     Although three-quarters (75%) of the Southlanders say the correction last October didn't change their opinion of investing their money in the stock market (whether it was riskier or safer), more were inclined to say they now feel it is a riskier (18%) place than a safer place (2%) to invest their money. Most demographic groups basically feel the same way. When asked what they did when the stock market dropped last October, a majority (55%) said they rode it out and did nothing, 5% said they bought more stock, 2% said they sold some stock and just 1% said they invested for the first time. A third volunteered that they don't invest in the market. This is consistent with other findings in the survey about confidence in the economic stability of the country and the stock market over the long term. It also falls in line with what really did happen in the market -- the smaller investors stayed in the market while the institutional investors were more inclined to be the ones pulling out.
     Will the Dow Go Higher or Lower: When Southlanders were asked if the Dow would go higher or lower at the end of this year than the 7900 points it closed with at the end of 1997, more respondents thought the Dow would go up (39%) more than it would go down (15%), with 34% saying it would remain about the same. Not surprisingly, a majority (54%) of those following the stock market closely say the Dow will be higher this year, while nearly half (48%) of the men say that.
     
Own Stock: Retirement Plans, Non-Retirement Plans, Stock Mutual Funds

     First, 30% of respondents say they own mutual funds, whether stock or non-stock funds. Of those, 26% say they own stock mutual funds, 13% say they own bond mutual funds, and 48% say they own both stock and non-stock funds (another way to look at the figures: 22.5% of total sample have stock mutual funds). And 28% say they have stocks either in a retirement plan (401(k), IRA/Keough) or a non-retirement plan (9% have a retirement account, 9% are in non-retirement stock and 10% have stock both in retirement and non-retirement stock accounts).
     Overall 36% of Southern Californians have stock of some sort. This is very similar to findings last year.
     Twenty-two percent of the younger respondents say they own stock (stocks or in stock mutual funds), 35% of those 30-44 years old, 48% of those 45-64 years old and 45% of the elderly. 43% of the whites own stocks, compared to 25% of the blacks and 24% of the Latinos.
     Mutual Funds: Almost 3 in 5 of those earning $60K have mutual funds, including 24% who have them in retirement funds, 7% in non-retirement funds, and 27% who have mutual funds in both retirement/non-retirement mutual funds. Just 40% say they are not in a mutual fund of any kind. Conversely, the poorer respondent (less than $20K) are less likely to have any funds (81%), as well as those earning $20K-$40K (77%). The respondents earning between $40K-$60K are also not inclined to have savings in a mutual fund (62%).
     Stocks: Again, the more affluent Southlander has more disposable income to invest in stocks. Half (51%) of this group owns stock, including 14% in stock accounts that are for retirement, 15% in stock accounts that are not for retirement, and 21% who invest in both retirement/non-retirement stock accounts. The results show stock ownership decreases with the decline of income levels -- 89% of those earning less than $20K don't own stock of any kind, compared to 77% who earn between $20K and $40K, 61% who earn between $40K and $60K, and 42% who earn more than $60K.
     More whites (33%) own stock than blacks (19%) or Latinos (21%). Not surprising, more than half (53%) of those following the stock market say they own stock, compared to 20% who don't follow the stock market closely.
     Length of Time in Market: No one said they got into the market over the last three months (since the major correction in October), only 1% say they got in between 4 and 6 months ago, 3% say 7 months to a year ago. Most people are in the market for the long term. Nearly 3 in 10 (28%) say they got into the market between 1 and 5 years ago, 27% between 6 and 10 years, and 39% say they've been in the market more than 10 years.
     Nearly three-quarters, 74%, of the younger respondents (18-29) say they have gotten into the stock market fairly recently, 5 years or less (with 6% saying between 7 months and a year). Also the female respondents are newer investors, with 35% saying 5 years or less. The elderly have been in the stock market the longest -- 90% say more than 5 years, including 37% who say more than 25 years. Latinos are in it the shortest, with 44% saying they have been investing 5 years or less, compared to 31% for blacks and 26% for whites.
     Virtually all investors say they are in the stock market for the long term and can't see themselves out of the stock market (76%). More than four in five of those following the market closely say nothing would get them out of the market entirely.
     Valuation of Stock: An overwhelming majority of stock owners (74%) say the valuation of their stock has increased (including 30% who say increased substantially, 44% moderately), with just 3% saying it decreased and 20% saying it remained the same. And of those who said the value of their stock increased, 12% say they feel much more financially secure, 28% feel somewhat more financially secure and 60% see no difference in their financial security. This increase in value is seen more as paper earnings than actual money in hand. 69% of Southlanders whose said their stock value increased, say they don't feel like they have more money to spend, even though their stocks are earning more, 4% say they have a lot more, 13% say a fair amount and 12% say not too much more. The elderly (26%) more than other age groups say they have either a lot or a fair amount more money to spend because their stocks are doing well.
     Asian Markets: Almost two-thirds (64%) say they don't have investments in the Asian markets, a quarter (24%) did not take any money out of their Asian investments, just 2% took all of their investments out of the Asian stock market, 1% say they took most of their investments out and 2% say some. These results are similar for most other demographic groups.
     
Non-Stock-Market Southlanders

     About a fifth (17%) of Southern Californians who don't own stock now, say they once owned stock, 76% say they never owned stock. Ten percent of overall non-stock owners were in the stock market 5 years ago or more, 7% were in the market from as early as 3 months ago or less to 4 years ago.
     Why did those who got out do so? The top three mentions are: a third say they needed the money, 14% put their money into other investments and 13% think the stock market is too risky.
     And, two-thirds of non-stock investors say they will probably/definitely not invest in the stock market, including 36% who say definitely not, and 23% who say it's a possibility. The primary reason why Southern Californians probably or definitely will not invest in the market is because they don't have any extra money.
     
How Southlanders Invest Their Money

     We asked respondents to tell us what kinds of investments, if any, they are investing. And it seems Southlanders are investing and saving in many different ways. They have multiple savings that are in a multitude of investments. However, 14% say they don't have any investments.
     So where are they putting their money? A preponderance of Southern Californians have a savings account (77%), followed by 36% who have a 401(k), 29% who have an IRA/Keough, 28% who have other investments (which were volunteered responses), 27% each for CDs and bonds, 19% each for money markets and real estate, other than primary residence.