Half of those polled say stocks will crash

May 12, 2011, 8:15 PM UTC

Skeptical market commentators aren’t the only ones who think stocks are headed for a fall.

Half of people surveyed believe the market is likely to drop 30% over the next 12 months, according to the latest results of the Chicago Booth-Kellogg School Financial Trust Index.

More are bracing themselves

That’s up from 41% expecting a crash at the time of the last survey, in December 2010, and the crashiest result since 55% of respondents predicted a steep decline in December 2008.

The results are drawn from phone surveys of a thousand people in mid-March. The rising expectations of a crash aren’t the only sign of a darkening public view of the economy: Trust in the financial system dropped to 20% in the latest poll, down from a not exactly robust 26% last time round and in line with the readings at the depth of the financial crisis.

“The latest findings show how fragile and temperamental the country’s financial system is right now, even as we slowly climb out the recession,” said Luigi Zingales, a finance professor at Chicago’s Booth School who is a co-author of the index along with the Northwestern Kellogg School’s Paola Sapienza.

The latest taste of financial doom comes as commodities are selling off, suggesting investors are taking a dimmer view of global growth over the coming year, and as the market braces for the end of the Federal Reserve’s bond-buying program.

The shift in market sentiment has some prominent market bears, such as value investor Jeremy Grantham and Gluskin Sheff economist David Rosenberg, predicting that stocks are about to get it in the teeth. They have made this case more than once before, true, and the market may yet rise to new highs. Even so, it’s getting harder to ignore the feeling that one way or another, stocks’ nine-month-long cakewalk is over.