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Few Expect a Crash Course for Stock Market

By Richard Morin
Washington Post Staff Writer
Friday, October 17, 1997; Page A24

Washington Post-ABC News Poll

Who's afraid of another Black Monday stock market collapse? Certainly not Charles Severance, a 50-year-old utilities engineer living in Green Bay, Wis. "I don't see the market crashing," he said. "It's a good time to buy stocks."

Jennifer Ostermeier agrees. "I don't anticipate any so-called Black Monday any time soon," said the 29-year-old Chicago public affairs specialist.

"I don't feel any impending sense of doom," said Daniel Hero, 31, an industrial radiographer who lives in Portland, Ore.

Neither do most Americans, according to a new Washington Post-ABC News national survey. Fewer than one in five predict a market crash in the next couple of years similar to the one that erased about 20 percent of the value of stocks on Monday, Oct. 19, 1987. Fewer than half could even remember what happened on Black Monday.

The poll results are significant because they suggest that Americans are not "irrationally exuberant," but are realistic in their expectations for the market and seem to understand that stocks offer risk as well as potential profit.

In the public's mind, the bloom is clearly off the decade-long market boom that rose out of the ashes of Black Monday. The number of Americans who say stocks are a "risky" investment has increased substantially in recent months, according to the poll. Half of those interviewed believe the stock market "is out of step with the economy." And four in 10 investors say that stocks are overpriced.

A total of 1,515 randomly selected adults were interviewed for this survey, which was conducted Oct. 9-13. The margin of sampling error for the overall results is plus or minus 3 percentage points. (See the complete data.)

The poll results and follow-up interviews with selected survey participants suggest that Americans remain cautiously optimistic about the direction of the market over the next two years. They think the best of the bull market has passed. But they also believe there's enough value left in the market to reward patient and smart investors.

Half of those interviewed said they expected the stock market to go up in the next year, while four in 10 believe the market will go down.

But neither the bulls nor the bears expect major movement. Among those who thought the market would go up, nearly all said they expected the increase to be small. Similarly, two out of three market pessimists predicted only a modest decline.

"The market should go up," said Constance Martin, 56, a stock owner and customer service representative for a trucking company. "Not that high, but it should go up, because of the economy."

"I think the fundamentals are there," agreed utilities engineer Severance. "I think the earnings are there. I think our productivity gains are creating the reason for the run-up in the stock market."

Others aren't so sure. "I believe there might be a correction" in the market, said Mark Merdinyan, 48, a disabled professor of commercial fisheries who lives in North Kingston, R.I. and does not now own stocks. "That would definitely be common-sensical. It's very high."

Ryan Sutter, 24, a computer programmer and stock investor living in Bloomington, Minn., said he's waiting for a decline so he can buy more stocks. "I'd put money in because I know it would eventually go back up," he said. "I think actually if it went down, that would probably be a good thing. I'm thinking long-term, thinking more for my retirement than the immediate financial gains right now."

Most stock owners aren't so bold -- or so patient. Seven in 10 stock owners interviewed said they'd leave their investments "where they are" if the market went down. However, those who said they'd put in more money outnumbered those who would take money out by a 2 to 1 margin. The notion of "buying on the dips" has been ingrained in investors by the market's frequent swift rebounds from temporary drops since the 1987 crash.

While most investors think the market will go up at least a little, even many optimists are wary. Fewer than half of those interviewed believed that now is a particularly good time to buy stocks. And the percentage of Americans wary of stocks as an investment has increased significantly in the past few months.

Nearly seven in 10 respondents -- 69 percent -- characterized stocks as a risky investment, up from 54 percent in August. Four in 10 said they thought the prices of stocks generally were too high, relative to the real worth of the companies. That view was more likely to be expressed by stock owners than by people who didn't own stock.

"The market's probably a bit high and overpriced," said Douglas Kretzinger, 47, an athletic trainer and stockholder living in Woodland Park, Colo. But Kretzinger said he doesn't expect a precipitous fall any time soon. "There are too many people in it for the long term, too many safeguards built in as opposed to 1987."

The Post-ABC News survey suggests that the record highs achieved by the market in recent months may be deterring many stock owners and would-be investors. Half of those interviewed -- 52 percent -- said the fact that the stock market is at near-record levels has made them less likely to invest for fear that a drop in stocks is not only inevitable, but near at hand.

"I just think it's very risky," said Kristy Talbot, 45, a stock owner and insurance company customer service representative who lives in Windfalls, Idaho. "I think they're very high right now, and I think there's going to be some type of fall pretty quick -- maybe not in the next year, but I'd say within the next two or three. I think there's a lot of people that are greedy, a lot of people that are spending money foolishly."

Still, one out of three stock owners said the boom market has made them even more willing to put money in stocks. Among those Americans who own stock, four in 10 said they'll probably buy more stock this year, while just 6 percent plan to sell.

The survey revealed just how closely tied many Americans are to the stock market. About half of those interviewed -- 48 percent -- said they had money invested in stocks or mutual funds. About half of those said they had bought stocks or mutual funds directly; the remainder said they acquired stock from a company stock plan.

Still, most Americans remain wary of risking their Social Security nest eggs on stocks. More than half -- 55 percent -- said they oppose putting some or all of the Social Security trust fund into the stock market, one way that's been suggested to keep the system from running out of money in the next 15 years.

The survey also found that many Americans continue to doubt the honesty of stock market professionals. Half of those interviewed said they believe most stockbrokers on Wall Street would "try to find a way around the laws governing their profession," while 39 percent said they would obey the law. Ten years ago, 45 percent viewed stockbrokers as law-abiding.

But the survey also found little appetite for more regulation of the stock market. Two in three respondents, including an even larger majority of stock owners, said regulation of the market should remain "as it is." Only 14 percent favored stronger regulation.

"Who would regulate it? The government?" asked Janis Netterville, 61, a retiree who owns stock and lives in Pasadena, Tex. "Too many government regulations -- the government already regulates things to death. I believe in less government regulation, not more."


© Copyright 1997 The Washington Post Company

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