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Investors' optimism wanes
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April 23, 2001: 12:59 p.m. ET
UBS PaineWebber-Gallup survey shows investor optimism at three-year low
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - U.S. stocks may be starting to find some footing and crawl out of their hole but investors remain unconvinced that the worst is over, according to a joint survey by UBS PaineWebber and the Gallup Organization.
According to their Index of Investor Optimism, the overall index fell 21 points to 116 in April, its lowest level in three years, as investors became more disenchanted with the U.S. government's ability to handle tax incentives for savings and investments.
"We've really had a lot of back-and-forth in Washington and a clear solution hasn't emerged," said Mary Farrell, senior investment strategist with UBS PaineWebber.
The telephone survey was carried out from April 2-15 and included 1,003 randomly selected investors with total savings and investments of $10,000 or more.
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I think they've been much more sobered but I think they believe in the market.
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Mary Farrell
senior investment strategist
UBS PaineWebber |
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As market participants search for that ever elusive bottom as a signal that it's time to start buying again, 59 percent of those surveyed believe the markets will reach new lows before finding some sustained recovery.
Despite the skepticism, 64 percent of investors think now is a good time to invest in U.S. stocks. But given the low number of investors who believe they can make a quick buck, the survey signals a shift toward a long-term investing strategy.
And that is a good thing, especially given the whipsawed action seen across the board in stocks recently.
"A lot of people got drawn into the short-term trading over the last couple of years," said Farrell. "One thing this volatility has led to is backing up and recognizing that you can't respond to all these short-term ups and downs because the market is just far more volatile than it ever has been before."
According to the survey, expectations for a short-term return fell to a record low in April at 8.7 percent, from the previous 10.4 percent in March.
"We believe today's investment environment presents excellent opportunities for those with buy-and-hold strategies, and we encourage all investors – particularly those with less experience in the markets – to stay focused on their long-term investment goals," said Mark Sutton, president of UBS PaineWebber's private client group.
Yet, a string of four interest rate cuts by the Federal Reserve in four months, aimed at strengthening the economy, has not done enough to inspire investors, according to the Index.
Approval of the Fed and its policies fell for the third straight month, with 71 percent of investors saying they approve, down from 81 percent in March and down from 87 percent in February.
"There's been so much negative publicity about the Federal Reserve not doing enough in time that I think people's confidence was deteriorating," said Farrell.
Still, she remains optimistic about investor sentiment turning around, suggesting that Fed approval would likely have been higher if the survey came after the latest surprise rate cut.
And the shift toward longer-term investing is another positive driving force. "I think they're (investors) feeling shell-shocked because we had this five-year unprecedented bull market. I think they've been much more sobered but I think they believe in the market – I'm pretty heartened by what I see out there." 
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