Confidence shattered
The picket signs have been put away and the rabble-rousing masses are conspicuous by their absence. Wall Street is the world’s largest stock market and it is running as smoothly as Usain Bolt does the 100 metres race, but there is a worrying trend developing on the bourses. Investors are no longer playing the markets with the kind of gay abandon that marked out their approach some time back and its not just because playing the market has become tougher to win in and more fickle than ever. It’s a domino effect of a worse kind for the market with investors lopping off stocks they own and reducing their holdings in favor of safer investments such as that provided by the bond markets.
There is a very real fear that this will remain a lingering sentiment; as they say, a crystal vase once broken can be fixed, but the cracks will always remain. This might be a lost generation of investors now that are so wary of stock declines that they won’t see the next big rally when it does come around (and it will at some time). It is a crippling fear of failure that has gripped the mind of this generation and you can blame a recessionary period coupled with high inflation or you can blame the mindset. Maybe you can pin the blame for this on both, but why even play a blame game?
Of course, two market corrections in the span of a period of 10 years means that conversation is now no longer about which stock is the one to go with and which one should be dumped like a hot potato. Almost all of them are being dumped with a vengeance and now talk is more about curtailing risk, saving cash and picking bonds over the raw charisma of stocks. Pulling cash out of the markets has been a stock in trade since the beginning of 2009, when markets first started to show signs of wobbly knees. That early weakness and the early flight of capital was the beginning of a free fall in which retail investors went scurrying for cover. Mutual funds, for long the poster boy of the stock market, has seen dollars flowing in and out of totaling up to almost a quarter of a trillion dollars since the beginning of 2008.
A quarter of a trillion; think about it.
Conservatism has well and truly set in and you can’t blame the average investor for being jumpy in the light of one of the worst downturns in the history of the stock market. Everyone wants to protect their savings and nest eggs, but it might be only years and not decades before investors return. All it needs is for something positive to happen and the masses will return. It’s almost as if you’re at the slot machine with your quarters waiting for someone to win big and those flashing lights and winning signs will get everyone to dunk their quarters into the machine. Everyone wants to win; the problem is everyone’s too afraid of losing right now.
