Investors Split on Whether

WASHINGTON, D.C. — Half of U.S. investors, 49%, were bullish on the stock market in the second quarter, saying they expected average stock prices to be higher by the end of 2019. At the same time, 23% were distinctly bearish, expecting prices to be lower at year’s end while another 28% predicted they will be the same.
Most subgroups of investors are moderately more positive than negative about the direction of the market. One exception is partisan groups, as Republicans overwhelmingly expect stock prices to increase (78%) while Democrats are slightly more likely to predict a decline than an increase (33% vs. 29%).
Other slight differences in investors’ outlook for the market in 2019 are likely related to these party differences. In particular, men, investors with more than $100,000 invested and retirees — all of whom tilt more Republican than their counterparts — are more likely than women, lower asset investors and non-retirees to expect the market to increase.
These findings are based on the Wells Fargo/Gallup Investor and Retirement Optimism Index second quarter survey, conducted by web May 6-12 using the Gallup Panel. Investors for this survey are defined as adults with $10,000 or more invested in stocks, bonds or mutual funds, either within or outside a retirement savings account.
At the time of the poll, the stock market was doing well, with the Dow Jones Industrial Average holding steady at just under 26,000 throughout the seven-day field period. Survey respondents were asked to say how the market’s current performance was making them feel on four different dimensions.
Sixty-one percent of investors said the market’s performance made them concerned the market was peaking and poised to drop. At the same time, 53% said it made them feel more confident about their own retirement savings.
While not majorities, large segments of investors also said the market’s performance was making them feel more comfortable about spending money (44%) and about their ability to make major purchases in the next year (40%). This so-called wealth effect may be reflected in the government’s latest report on consumer spending, showing increases in purchases on motor vehicles, restaurants and hotel accommodations. Despite this, the increase in overall spending reported by the Commerce Department was fairly muted.
There are a few notable distinctions in these findings among subgroups of investors:
With the stock market back near record-high levels after a down year in 2018, investors are showing signs of concern. Half believe the market will continue to deliver gains in the second half of 2019, but the other half predicts the market will flat-line or retreat, neither of which is good for portfolios.
Still, green stock tickers make the slight majority of investors, particularly retirees, feel more confident about their retirement security. Such confidence can have dividends for the economy if healthy portfolios cause investors to boost their spending — a phenomenon known as the wealth effect. About four in 10 investors, fueled mostly by Republicans, report feeling this way. One reason this isn’t reflected in stronger overall consumer spending could be that Republicans’ exuberance about the stock market is offset by Democrats’ heavy skepticism.