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Poll: The Economy And The Market

Against a backdrop of economic uncertainty and increasingly pessimistic opinions about the economy, views of the stock market have also become more negative since January. Only 43 percent rate the condition of the stock market as good, and an equal number say the market is in bad shape. At the start of the year, 6 in 10 Americans described the market as good and only a quarter said it was bad. Investors are also divided – 44 percent now say the market is good and 40 percent say it is bad.

Nor is the public as confident as they were a few months ago that the stock market will recover. Forty-nine percent think the stock market will go up in the next year, while 34 percent say it will go down. Back in April, 60 percent thought the stock market would go up and only 24 percent thought it would go down.

Investors are only slightly more optimistic that the market’s performance will improve - 54 percent think the stock market will go up in the next year, compared to 41 percent of non-investors who feel that way.

The poor performance of the stock market has yet to force most investors to re-think their investment strategies, however. Six in ten investors say they have not changed their approach to investing as a result of what’s happened in the stock market over the past year. Nevertheless, 40 percent say they have made changes in their investment strategy.

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Declining opinions about the stock market closely track the public’s increasing economic concerns. Now, 44 percent say the U.S. economy is in bad condition - the lowest evaluation since January 1996, when 45 percent said the economy was bad, and 53 percent said it was good. Nearly half the public now thinks the economy is getting worse.

With the lackluster performance of the stock market over the past year and public uncertainty about the future, the number of Americans who view investing in the stock market as risky has increased since last year. Three-quarters of Americans now say investing in the stock market is risky, while only 18 percent say it is safe. Last year, 67 percent thought stock market investments were risky and 26 percent described them as generally safe.

Those who know little about investing are more likely to describe a stock investment as risky. Eighty-four percent of Americans who say they know little or nothing about investments think a stock investment is generally risky, and only 8 percent say investing in the market is generally safe.

Even investors are more skeptical than they were last year about investments in the market - 70 percent think investing in the stock market is generally risky, while a quarter feel it is safe. Last year, 60 percent described the market as risky and 35 percent felt it was generally safe.

Despite their negative opinions about the economy and the stock market, fewer than half the public, 44 percent, think the U.S. is currently in a recession. 50 percent do not think his is the case. Among investors, 46 percent think the country is in a recession and 49 percent do not.

Perhaps because investors feel more knowledgeable about investing and express optimism in the direction of the stock market, they are especially open to the proposal of privatizing Social Security - allowing individuals to invest portions of their Social Security taxes. Still, most investors think Social Security should remain a government-controlled safety net. The majority of investors say allowing individuals to invest Social Security taxes is a good idea, and they would invest theirs in the stock market if they were allowed to do so.

It helps that many investors have outside help about their investments. Half of investors currently follow a broker’s advice when making investment decisions; four in ten investors generally decide by themselves which stocks to buy.

People who don’t know much about investing in the stock market or who don’t currently have investments are wary of it, and say they’re not likely to stick their toe in the market water soon. Only about one quarter of each of those groups would be likely to invest their Social Security taxes in the market, although more approve of the concept. The vast majority see investments in the market as risky.

Among all adults, 52 percent say privatizing Social Security is a good idea, and 43 percent say it is a bad idea. Forty-two percent would be very or somewhat likely to invest their Social Security taxes in the stock market if they were allowed to do so, while a majority, 56 percent, says it is unlikely that they would put their Social Security taxes in the stock market. And those who are likely to invest their Social Security taxes think they’d probably do pretty well for themselves; 78 percent say they know a lot or some about investing.

There are continuing concerns about the future of the Social Security system. As in many previous polls, only about one-third of Americans expect the Social Security system to have the money for their benefits when they retire. 53 percent don’t think the Social Security system will have the money available when they retire.

This poll was conducted among a nationwide sample of 850 adults, interviewed by telephone August 28-31, 2001. The error due to sampling could be plus or minus three percentage points on results based on the entire sample. Sampling error for subgroups may be higher.

For detailed information on how CBS News conducts public opinion surveys, click here.

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