Trust in Stock Market Improves Slightly Under Obama
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Trust in Stock Market Improves Slightly Under Obama

With a new plan to deal with the financial crisis and the aura of goodwill surrounding the first days of Barack Obama's presidency, trust in the stock market made slight gains in the first quarter of 2009.

Paul Holmes

With a new plan to deal with the financial crisis and the aura of goodwill surrounding the first days of Barack Obama's presidency, trust in the stock market made slight gains in the first quarter of 2009, according to the most recent findings in the Chicago Booth/Kellogg School Financial Trust Index. In contrast, trust toward banks and large corporations has continued to decline in the last three months, following recent headlines of corporate layoffs, executive bonuses, and banking disasters.

The Chicago Booth/Kellogg School Financial Trust Index is a quarterly look at Americans' trust in the nation's financial system, measuring public opinion over three-month periods to track changes in attitude and to provide a better understanding of public trust.

Researchers found that from December 2008 to March 2009, the Financial Trust Index has dropped slightly from 20 percent to 19 percent, with a slight increase in trust toward the stock market, from 11 percent in December to 13 percent in March 2009.

“We discovered clear signs that trust in the stock market has gone up in all areas that we measure, such as a higher willingness to invest, higher expectations on returns, and lower expectations that the stock market will drop significantly,” says Luigi Zingales of the University of Chicago Booth School of Business, co-author of the study. “In a short amount of time, this shows growth in overall confidence in the market, however slight.”

At the same time, Zingales and co-author Paola Sapienza of the Kellogg School of Management at Northwestern University point out a substantial decrease in trust toward banks, from 34 percent in December to 29 percent in March 2009, and in large corporations, from 12 percent to 10 percent over the same time period.

"The drop in trust toward banks and large corporations appears to be consistent with the negative publicity they've experienced in the first quarter of 2009," says Sapienza. "This tarnished image, especially of banks, could impact their value moving forward in terms of rebranding and attracting new customers."

The Index also studied the impact on trust vis-à-vis the government's intervention in the financial system. The March 2009 results demonstrate that government intervention still makes the majority of Americans less confident in investing in financial markets (67 percent). However, this is a considerable change from 80 percent who felt less confident in December.

 

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