Consumers are reallocating their investments, not dumping cash into the stock market.
By MARALINE KUBIK
VINDICATOR STAFF WRITER
YOUNGSTOWN -- Consumers are holding onto their cash rather than spending or investing in an uncertain economy.
With falling interest rates and a volatile stock market, people who have cash on hand are in a dilemma as to what to do with it, said Charlie White, a broker at Moors & amp; Cabot, Liberty. "They're kind of hoarding their cash right now."
Citing a television news report, White said some $4.5 trillion in the United States is sitting in savings and money market accounts earning about 2 percent in interest each year.
Many investors "had their heads handed to them when the bottom fell out of the dot-com stocks," he said, so they have become more conservative, staying with the blue chips, solid companies that have been around for a long time and are profitable.
In the past two or three weeks, the market has started to rebound, he said. As it becomes more stable, White expects some of the cash in low-interest bearing accounts to find its way into the market. "There are some terrific buys," he said, citing GE, Nokia, Cisco Systems and Microsoft as some of Moors & amp; Cabot's favorites.
Local investing trends: Some investors recognize that there are bargains on the market right now and are looking to take advantage of them, said Dave Bennett, senior vice president and manager of Butler Wick & amp; Co. Inc.'s Youngstown office. They aren't necessarily investing more money, he said, but reallocating their investments.
Many of Butler Wick's clients are moving from bonds to value-priced stocks expected to increase in value within the next six to 24 months, Bennett said. Most of these investors are interested in the long-term results of their investments and are looking for advice. "They are not do-it-yourselfers," he said.
Deposits: With consumers holding onto their cash, one might expect deposits into savings and money market accounts to increase.
"We are attracting some new funds," said Robert J. Steele, vice president of deposit services at Home Savings & amp; Loan Co., but he isn't convinced that there is a connection between an increase in deposits and a decrease in consumer spending.
"We're seeing increased deposits because we're offering attractive rates," he stated.
Of the new money deposited in Home Savings accounts, he added, 75 percent belongs to regular customers. Most of the new deposits are in money market accounts, which are completely liquid, and short-term -- 18 months or less -- certificates of deposit.