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New stock market formula: Recession + losses = extreme fear

June 1, 2011 |  2:32 pm


Even before share prices tumbled Wednesday, Americans were feeling decidedly downbeat about the stock market.

Though it’s been more than two years since the market launched into a recovery from its financial-crisis low, average investors remain extremely fearful of stocks.

According to a new survey by Prudential Financial Inc., 58% of people say they’ve lost all faith in stocks, while 44% say they’re unlikely to ever invest more money in the market.

In one measure of what might be dubbed the New Trepidation, just 37% of investors today describe their portfolios as aggressive, down from 46% before the recession. Likewise, 40% characterize their portfolios as conservative vs. 33% previously.

The irony is that investors seem to realize the potential long-term consequences of shunning stocks, with 73% saying they worry that their more conservative investments won’t earn enough to make up for previous losses.

Even with Wednesday’s 280-point drop, the Dow Jones industrial average still is up 88% since its March 2009 low.

“It’s clear that the financial crisis has driven fundamental changes in the way Americans are saving for retirement, with millions of Americans perhaps at even greater risk of having insufficient income for a secure retirement,” said Christine Marcks, president of Prudential’s retirement unit.

Where to turn for help?

Apparently, not to financial services companies that sponsor these sorts of surveys.

Signalling “a pervasive lack of trust,” 69% of respondents said few financial firms are trustworthy and 62% couldn’t name a single firm they trust.

“Americans’ lack of trust in the financial services industry is a significant issue,” the report said.

Well, at least Wall Street is sharing some pain with ordinary investors.


Dow falls 279 points on fears about economy

10-year Treasury note yield plunges below 3% on economy fears

Debt ceiling drop-dead date remains Aug. 2, Treasury says

-- Walter Hamilton

Photo: Traders on the floor of the New York Stock Exchange. Credit: Reuters