WASHINGTON - The U.S. stock market, helped by the record economic expansion, will overcome higher interest rates and rally for at least another year, wealthy investors say in a new survey.
Ninety percent of this elite level of active investors - defined as those with annual incomes of $250,000 or more and $150,000 or more in stocks - also plan to increase their stock holdings in the coming months or hold on to what they already have, according to a poll conducted by Penn, Schoen & Berland Associates for Bloomberg News.
"In terms of the economy, it's the best I've ever seen, for the longest I've ever seen," said Allan Meyers, who oversees $3.5 billion of equity assets as chief equity officer with Lyon Street Asset Management, the investment division owned by Grand Rapids, Mich.-based Old Kent Financial Corp.
This kind of investor optimism could make it harder for Federal Reserve officials to slow an economy they fear may be overheating. Fed Chairman Alan Greenspan told Congress last month that strong consumer demand, aided by rising stock prices, could lead to shortages of goods and services that could generate inflation.
Three-quarters of the wealthy active investors surveyed in the nationwide poll last month said they expect the bull market to last another year or two - and more than one out of three expect a longer run for stocks. That optimism comes even as 84% predict interest rates will rise in the coming 12 months, and 52% say they are "worried" about higher borrowing costs.
"People have made so much money," said Robert Klemkosky, a professor of finance with Indiana University. "We've had corrections every year, and we haven't had a bear market. It's always paid to jump in and buy stocks."
The survey of 600 investors was conducted between Jan. 29 and Feb. 16 and has a margin of error of plus or minus 4 percentage points.
- Bloomberg News