Do Americans Trust the Stock Market?

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The Federal Reserve has taken dramatic steps in recent years to stabilize banks and force investors into riskier assets. This so-called “wealth effect” is an idea that a sustainable economic recovery will form as higher asset prices cause more people to feel confident and spend money. The strategy has worked to some degree in the short-term, but nearly three in four Americans are still cautious on the stock market.

Despite a five-year bull market and record low interest rates, 73 percent of Americans across all age groups and income levels say they are not more inclined to invest in stocks, according to a new survey from Bankrate. That figure is relatively unchanged from 76 percent in April 2012 and April 2013. Only 22 percent say they are more inclined to invest in stocks. In fact, just 34 percent of those with salaries of at least $75,000 say they were more inclined to invest in stocks these days.

“Americans may be avoiding the buy-high, sell-low habit seen in previous market cycles, but only because they’re not buying at all,” said Greg McBride, Bankrate’s chief financial analyst, in a press release. “An overly conservative investment stance compounds the problem that so many Americans have of not saving enough for longer-range goals like retirement.”

Other recent reports also indicate that cash is king for many investors. According to BlackRock, the world’s largest money manager, investors all of income levels in the United States held 48 percent of investable assets in cash. Only 18 percent of assets were held in stocks, and 7 percent in bonds. Stocks were most widely held in Hong Kong and Taiwan, two countries that also enjoy high overall rates of household savings. The survey polled more than 17,000 investors, including 4,000 Americans.

It’s easy to understand why Americans are wary of stocks. The stock market has suffered two breathtaking crashes over the past decade. Between January 2000 and July 2002, the S&P 500 dropped from 1,500 to 815. During the Great Recession, the index plummeted from 1,525 to 800. With the help of the Federal Reserve and its accommodative monetary policy, stocks have recovered losses and even made new all-time highs, but many investors still don’t trust the market and would rather save their money.

A new survey from Gallup reveals that 62 percent of Americans enjoy saving more than spending, representing one of the widest gaps since Gallup started keeping track in 2001. The views changed little across standard demographic segments of the nation, such as race, education, and political party.

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