One-Third of You Think the Economy Is a Mess: Here's What That Tells Us
We recently surveyed a group of Motley Fool members, asking how they feel about the economy and the stock market.
4,270 of you were kind enough to chime in. Here's what you told us (data collected between April 17 and May 13, 2013):
What is your general feeling about the overall U.S. economy?
Very pessimistic -- A new recession is coming.
Pessimistic -- The worst is behind us, but we'll have a long, slow recovery.
Neutral -- I'm not sure.
Optimistic -- Things are better than people think.
Very optimistic -- Good times are ahead!
A divided group. About a third of you are pessimistic, a third optimistic, and a third don't know.
Frankly, I think that says a lot.
There is no clear economic theme right now, in either direction. The stock market is at an all-time high, but unemployment is still high. Housing is rebounding, but prices are still well below the level many bought their homes for. It's not like the late 1990s, when things were clearly getting better, or 2008, when the economy was clearly in free fall. There's just a lot of variability.
How you feel about the economy is heavily dependent on age, education, where you live, and whether or not you own stocks -- more so than usual, to an almost bifurcated degree. Unemployment for those with a bachelor's degree is 3.9%; for those without a high school diploma, it's 11.6%.
These divergences also help explain the political flame-throwing debates of the last few years. When some parts of the economy are doing better than ever and others are still mired in a depression-like slump, it's no wonder the phrases "out of touch" and "in denial" are hurled at opposing viewpoints. Different people can be looking at totally different economies.
Next, here's how Fools feel about the stock market:
What is your expectation of the market over the next six months?
I am not sure
Very Bearish: Down 20% or more
Somewhat Bearish: Down by 10%-20%
Somewhat Flat: Up/Down 10%
Somewhat Bullish: Up 10%-20%
Very Bullish: Up 20% or more
Not a lot of conviction here. Most of you expect something that rounds to nothing.
Part of that is because we asked about the short term, which (thankfully!) you know is heavily influenced by random chance.
But here's another explanation. A colleague and I were talking this morning about how so many things that were guaranteed, promised, assured to cause the market to do this or that over the last five years never happened.
- Quantitative easing was said to guarantee high inflation. Five years later, it hasn't.
- Reckless government policies were said to make gold miners one of the most attractive sectors. Instead, it's been one of the worst.
- Trillion-dollar deficits were said to scare creditors and push interest rates higher. Five years later, they haven't.
- A high CAPE valuation ratio in 2010 was said to make stocks like way overvalued. Instead, the S&P 500 rallied 50% and has a similar CAPE ratio today.
To quote investor Dean Williams, "There is just too much evidence that our knowledge of what governs financial and economic events isn't nearly what we thought it would be."
Maybe more of us are coming to terms with that reality, and trying to predict the future less. If that's the case, it's a positive development in my book.
The article One-Third of You Think the Economy Is a Mess: Here's What That Tells Us originally appeared on Fool.com.Fool contributor Morgan Housel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.