CEOs bullish on equities.OVERALL CONFIDENCE in the business climate declined slightly this month, but CEOs remain very upbeat in general about the performance of U.S. stocks as opposed to real estate or bonds. The broadest indicator, the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Confidence Index, dipped by 6.5 points in September September: see month. to 164.6 (see chart, bottom left). Two closely watched components, Current Confidence and Future Confidence, also dropped by similar amounts. The gap between the two remains wide, suggesting that CEOs are confident about today's conditions, but less so about conditions one quarter hence. Despite that, however, the 574 readers who responded to our latest email polling are sanguine sanguine /san·guine/ (sang´gwin) 1. plethoric. 2. ardent or hopeful. san·guine adj. 1. Of a healthy, reddish color; ruddy. 2. about the performance of American equities. Asked whether equities, real estate or bonds would perform best over the next one year and over the next five years, some 50 percent of corporate leaders expect stocks to be the top performing asset class this year, citing an expected return Expected Return The average of a probability distribution of possible returns, calculated by using the following formula: of 7.2 percent, edging out real estate (a 7.0 percent rate of return) and U.S. bonds (a mere 4.2 percent return). "Short term, we should see a rise in domestic equities as reported earnings continue to rise," one respondent In Equity practice, the party who answers a bill or other proceeding in equity. The party against whom an appeal or motion, an application for a court order, is instituted and who is required to answer in order to protect his or her interests. predicted. "Increases in interest rates in response to the onset of inflation from higher energy costs should begin to impact real estate gains, with frothy froth·y adj. froth·i·er, froth·i·est 1. Made of, covered with, or resembling froth; foamy. 2. Playfully frivolous in character or content: a frothy French farce. markets seeing price declines." One other reader pointed to the potential of American technology companies. "Technology stocks, especially the likes of eBay, Google (Google, Mountain View, CA, www.google.com) The largest search engine on the Web, founded by Larry Page and Sergey Brin, two Stanford University students. In 1996, they developed their "BackRub" search engine, named after its unique page ranking method (explained below). and Yahoo, are going to be the powerhouses," this reader wrote. "We are clearly entering an unprecedented era of growth." Even more striking was our respondents' attitudes toward the return of these assets over a five-year time frame. Out of the readers who responded, a full 75 percent said U.S. equities would outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. the other classes, with 18 percent picking real estate and just 7 percent picking bonds. If our readers are right, it's a good time to be getting into the stock market and staying there no matter what is happening in the broader economy. RELATED ARTICLE: THE NUMBERS [GRAPHIC OMITTED]
What domestic asset class will perform the best?
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1 year 5 years
Stocks 49% 75%
Real Estate 35% 18%
Bonds 16% 7%
What will be the average rate of return for these asset classes?
Stocks 7.2% 9.8%
Real Estate 7.0% 7.4%
Bonds 4.2% 5.0%
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