Number in U.S. who see stocks rise hits 5-yr high: survey

By Herbert Lash

NEW YORK (Reuters) - The bull market on Wall Street is giving Americans greater confidence prices can go higher as expectations for stock gains reached a five-year high in July, a consumer survey said on Friday.

Consumers in July thought that there was a 64 percent chance that a diversified stock fund would increase in value, up from 54 percent a year ago and a low of 41 percent in early 2003, according to the Reuters/University of Michigan Surveys of Consumers.

Consumers were more likely to expect gains in stock prices than at any time since 2002, with the early July reading setting a five-year peak. The meltdown from the 1990s craze in Internet stocks hit bottom in October 2002.

Rising stock prices were most expected by households that had the largest stock portfolios and highest incomes, the survey found. Gains were least expected by consumers with the lowest incomes and by those who did not own stocks.

Expectations of rising stock prices were significantly associated with consumer confidence, the survey said.

The Index of Consumer Sentiment was 35 percent higher among those who put the probability of stock gains at more than 75 percent, compared with those who judged the probability at less than 25 percent.

"With stock ownership reported by more than six in 10 households, the recent gains in stock prices were a welcome offset to widespread concerns about the impact of the housing slump on wealth," said Richard Curtin, director of the survey.

Despite an under-representation of top wealth holders in household surveys, the data indicates a substantial equity stake among U.S. households, the survey said.

Only those in the bottom third of income distribution and consumers who do not own their home have stock-ownership rates below 50 percent, it said.

Although the propensity to spend because of rising stock wealth has been estimated to be somewhat lower than that caused by rising housing wealth, "sustained gains in stock prices will act to increase consumer spending across a broad range of households," Curtin said.