Investors still leery of market recovery

March 10, 2010|By Gail MarksJarvis | Tribune Newspapers

It was the one-year anniversary Tuesday of the day the stock market began to heal from its 57 percent downturn, and a traditional gift on such occasions, appropriately, is paper.

Although the stock market has climbed 69 percent since March 9, 2009, individuals wonder if they can trust the paper gains they've experienced since the stock market ravaged their savings for almost two years.

Individual investors, groomed by the financial industry to expect 10 percent average annual returns in the stock market, remain traumatized after devastation far worse than many advisers ever suggested was possible.

Meanwhile, the best and brightest market strategists on Wall Street continue to debate whether the global recovery can be trusted. The optimists see the global economy destined for a strong recovery, with stocks moving higher. The cautious crew worries about underlying economic weakness, government debt and political impotence and thinks stocks already reflect the modest recovery envisioned.

"You have heard all the arguments," Leuthold Group analyst Doug Ramsey said. "Denial and dismissal of strengthening economic reports is a traditional feature of the second phase of a bull market."

Individuals want more convincing before trusting the rally. They have poured a record amount of money into bond funds despite warnings that bonds could turn into losers in a rising interest rate environment. And in the aftermath of losses in their savings and threats to their jobs, they are feeling vulnerable.

In a survey of Americans by the Employee Benefit Research Institute, research director and professor Jack VanDerhei found deep suspicion of financial institutions and fear about the future.

Confidence about living a comfortable retirement is at a 20-year low, said VanDerhei. After suffering through the losses in the stock market and continuing threats to jobs, just 16 percent are very confident, he said, about having enough money for retirement.

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