Don’t Trust the Market? You’re Not Alone, For Good Reason
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The Dow and S&P 500 set another round of records last week but enthusiasm for stocks on Main Street remains muted, at best.
Oh sure, there are plenty of stories about retail investors “rushing” back into the market but such analysis fails to put the recent trend into perspective.
In the first quarter, inflows into equity mutual funds totaled $62.5 billion, according to Lipper. If this pace keeps up, 2013 inflows would be the highest since 2000, according to CNN Money.
By comparison, approximately $445 billion came out of equity mutual funds from 2007 to 2012. And after a very strong start in January, inflows dried up in February suggesting investors will be quick to head for the exits at the first sign of trouble.
Indeed, Monday’s stock selloff and rout in gold are almost certain to test any recent excitement for investing.
Many reasons have been proffered for investors’ reticence to embrace the rally, notably: a still sluggish economy, high unemployment, falling median household income, fresh scars from the Great Recession, as well as bad memories of the bursting of the Dot.com and housing bubbles.
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