Your fund returns are through the roof. The market is smashing records on a daily basis. So why aren't you more excited? Recent studies have shown that most investors are expecting rough economic seas ahead.
Clearly there is a disconnect here because strong market activity typically isn't met with widespread pessimism.
'The market's move is dollar-weighted, it's being fueled by the big institutions but retail investors have, for the most part, not participated,' says Jack Ablin, chief investment officer for Harris Private Bank in Chicago. 'Fewer and fewer people are participating in the market's prosperity.'
Some of that situation is hangover from the last bear market. Investors who became euphoric in the late 1990s got hammered when the market turned in 2000 and they're not anxious to repeat the experience. They discount the market's performance because of all the negative factors they see out there and don't want to get caught up in any euphoria because that was a big reason they got tripped up the last time.
Another issue is inflation, particularly as it impacts regular costs and savings. This is where, for many people, rising gas prices figure in.
A recent study conducted for the Civil Society Institute's 40MPG.org project showed that about half of all households, regardless of income level, will "definitely or probably" have to cut back on personal spending if gasoline hits $3.50 per gallon."
While the current somewhat low inflows of new money to stock funds (relative to money market and bond funds) is a mild positive for stocks (fund investors tend to be wrong), we have not seen fund investors pull big money out of stock funds. Such a move would be needed before there will be any real bargains in the stock market.
It is quite possible that individual investors are more accurately assessing stock market risk than professionals these days. The economy is slowing, but the stock market is speeding along. That can’t go on forever.
Do You Know Something the Pros Don't?
Your fund returns are through the roof. The market is smashing records on a daily basis. So why aren't you more excited? Recent studies have shown that most investors are expecting rough economic seas ahead.
Clearly there is a disconnect here because strong market activity typically isn't met with widespread pessimism.
'The market's move is dollar-weighted, it's being fueled by the big institutions but retail investors have, for the most part, not participated,' says Jack Ablin, chief investment officer for Harris Private Bank in Chicago. 'Fewer and fewer people are participating in the market's prosperity.'
Some of that situation is hangover from the last bear market. Investors who became euphoric in the late 1990s got hammered when the market turned in 2000 and they're not anxious to repeat the experience. They discount the market's performance because of all the negative factors they see out there and don't want to get caught up in any euphoria because that was a big reason they got tripped up the last time.
Another issue is inflation, particularly as it impacts regular costs and savings. This is where, for many people, rising gas prices figure in.
A recent study conducted for the Civil Society Institute's 40MPG.org project showed that about half of all households, regardless of income level, will "definitely or probably" have to cut back on personal spending if gasoline hits $3.50 per gallon."
While the current somewhat low inflows of new money to stock funds (relative to money market and bond funds) is a mild positive for stocks (fund investors tend to be wrong), we have not seen fund investors pull big money out of stock funds. Such a move would be needed before there will be any real bargains in the stock market.
It is quite possible that individual investors are more accurately assessing stock market risk than professionals these days. The economy is slowing, but the stock market is speeding along. That can’t go on forever.
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