After the crisis of 2008, retail investors ran screaming from the stock market for the perceived safety of bonds. Since 2008, more than $1 trillion has come out of equity mutual funds and gone into bond funds, according to ICI data.
Even the doubling of the S&P 500 (GSPC) from its March 2009 lows failed to stop the outflows from equity funds. Many investors simply didn't trust the rally and confidence was further damaged by the 'flash crash' of May 2010.
Now comes the disastrous Facebook IPO (FB), which more than a few pundits believe has crushed any hope of getting retail investors excited about stocks again.
"Say goodbye to the individual investor on Wall Street," HDNet chairman (and Dallas Mavs owners) Mark Cuban wrote on his blog in the wake of Facebook's IPO. "Whatever positive impression they had of the IPO market and the stock market in general was just torched to the ground."
Mike Santoli, senior editor of Barron's, recently addressed chatter about the "death of equities" -- an allusion to the famous 1979 Business Week cover -- and comes to a very different conclusion.
Even if wildly successful, Santoli doesn't believe Facebook's IPO would have reignited retail interest in stocks. Instead, the botched IPO and grim aftermarket performance mainly served to reinforce investors' preexisting skepticism, Santoli says. "It was another excuse to stay away if you were already were away."
Some bulls see retail investors' distaste for stocks as a great contrarian indicator, but Santoli notes the great bull market of the 1980s-1990s didn't start until three years after Business Week's "death of equities" cover and that retail investors were consistent sellers during the big rally off the March 2009 lows.
"If there is a 'death of equities', it's very slow in coming," he says.
As was the case in the 1950s, Santoli believes the stock market is back to a "professionals market," which isn't necessarily a bad thing. "Better to see that than people overexcited and thinking Wall Street was invented to get them rich," as was the case in the late 1990s.
With stocks tumbling Friday morning and year-to-date gains being wiped out, there's little risk of that happening anytime soon.