Once bitten, twice shy! Retail stock investors, haunted by the market meltdown that followed the 2008 financial crisis, are not rushing back into buying stocks, despite all the equity exchanges ringing up strong gains for the first quarter, say financial advisers.
Retail investors have been burned before. They took it on the chin in the downturn, seeing their 401(k) pension plans evaporate with the sinking blue-chip index.
“I can tell you this: With the rise in the market, I have had a grand total of two clients calling about it,” said Merrill Lynch adviser Larry Rothenberg. Not many of his wealthy retail clients want to load up on stocks. “One said, ‘Maybe we should buy a little more,’” said Rothenberg. “The other said, ‘Maybe we should lighten up.’”
As the markets closed out the first quarter on Thursday with two indexes in record territory, the S&P 500 took the percentage win, up 11.7 percent, or 160 points, for the first three months, followed by the Dow Jones industrial average, up 11.25 percent, to close up 1,474 points. Pulling up the rear, the Nasdaq rose 8.2 percent, or 248 points, for the quarter.
The skeptical attitude of Rothenberg’s clients is not unusual in today’s markets and uneven economy. Many investors are scared. Rothenberg and his team manage about $1.5 billion in client assets, about $3 million to $4 million for the typical client. And although Rothenberg carefully maps out long-range financial goals that can stretch to a decade, he’s seeing no frenzy to sharply dress up portfolios with equities.
“I don’t think [equity retail investors] are coming back,” said financial adviser Philip Kiernan Jr. at Enhanced Dividend Capture Partners. Kiernan finds this a bit puzzling, since the Dow has more than doubled since its 2009 low.
“Sure, somebody is buying stocks,” Kiernan acknowledged, noting how institutional investors, including hedge funds and pension funds, with an assist from the Federal Reserve’s easy money policy, have likely played the biggest role in the Dow’s latest ascent.