Americans Regain Their Faith In Stock Market

The DJIA fell from over 14,000 in October 2007 to under 6,600 in March 2009. It was a historic drop that left many Americans without savings or retirement funds and drove many of them completely out of the market. The market has recovered enough that it is over 11,200 and gains ground nearly every week. Some people have gained back a good deal of their investments. That has not helped the value of their homes and the 11 million people with underwater mortgages, but it has brought millions back from the despair of having nothing financially.

A new Gallup poll shows that many Americans have regained their faith in the market. The research shows that “The 22% of Americans who now say stocks or mutual funds constitute the best long-term investment is up from 15% a year ago.” That number is still relatively low. Oddly enough many people still think that real estate is a better long-term investment than stocks. That would seem counterintuitive based on the sharp drop in real estate and the low likelihood that it will recover any times soon.

The renewed faith in the markets is actually relatively isolated to the more wealthy. That is not terribly surprising because most equities are helped by people with high incomes. They have seen their investment slide and then recover. Many people with incomes below $30,000 never held stocks at all, so their suspicions of the markets may be based more on what they read and have heard rather than their own investments.

The divide in stock market perceptions is also based, in large part, on levels of education. Those with a positive attitude toward equities tend to be college graduates.

Institutions have already returned to the markets. For the last year, it has given them good return especially investments in magacap tech and bank stocks and funds that simply play the indexes.

The well-to-do investors have decided to follow the “smart money” back into the market. That may be happening just before the market tops, as it often does.

Douglas A. McIntyre

Sponsor: 3 Recovery Stocks to Own Now – Get the names of the best cheap stocks to rebuild your wealth in 2010 and beyond.