|Anna-Louise Jackson and Anthony Feld|
Spending on expenses including securities commissions, investment advice and custodial services totaled about
“People are shying away from stocks since the recession, reflecting a very conservative approach to investing,” said
The Standard & Poor’s 500 Index closed at a record 1,593.37 on
Outflows from U.S.-based stock mutual funds totaled about
The experience of the past several years has made a “much more conservative trader” out of
“I don’t have the intestinal fortitude to gamble like I did and see no need to trade like a cowboy,” Rodriguez said, adding that the amount he spends on investing also has decreased because he now executes about one trade a month, down from as many as eight. “Everything that I thought I understood about the market seemed to wash away and get replaced with doubts and fears.”
While Rodriguez has stayed in the market, some who were financially hurt by the recession and dropped out are finding it “very intimidating to jump back in,” said
“People are nervous that another shoe could drop” in the form of another recession emanating from the European debt crisis, Rotblut said.
Similarly, near record-low interest rates haven’t been enough to push would-be investors back into the stock market, as “many consumers remain risk-averse,” said
“People still aren’t swayed to invest in stocks and they continue to hunker down in safe haven investments,” McBride said. The portion of survey respondents who said they’re not inclined to invest in stocks is unchanged from a year ago, even though interest rates have come down and the stock market has rallied in the interim, he said.
Until there’s greater economic stability and less volatility in the equity market, consumers probably will remain “very lackadaisical” toward investing in general, Sri-Kumar said.
Gross domestic product grew 2.5 percent in the three months ended
Consumer reluctance to spend on financial services since the downturn “is essentially a time bomb for the future” and is concerning because “it can’t just be institutional investors present in the equity market,” Sri-Kumar said. “It’s as if consumers got hit over the head and aren’t saving enough for retirement.”
A lingering fear from the market’s collapse in 2008 and the related losses from that continue to hold back many would-be investors, Hoffman said. People who lost a lot of money may not be able to justify paying a financial adviser anymore or buying and selling stocks, cutting down on fees and commissions, he said.
Investment-related spending appears to be stabilizing “from an artificially high level” reached in the market boom that preceded the recession, said
“There certainly was a speculative environment in 2006 and 2007 that encouraged activities like day trading that boosted this rate to an unsustainable level,” Dye said. This share of spending may be normalizing now, which “could be a fairly positive outcome,” he said.
Investment spending hasn’t fallen below its 23-year average, which shows “people aren’t stuffing money in the mattress or burying a jar in the backyard,” he said.
While money allocated to financial services has contracted since 2007, other expenses have increased. Health-care expenditures — including outpatient services and hospitals — accounted for 16.3 percent of total personal consumption in February, up about 2 percentage points from the 10-year prerecession average,
Still, the equity rally so far this year could entice more individuals to return to the market, causing the share of spending on financial services to “blip up” again, Hoffman said. The S&P 500 has risen 11 percent since
Even amid the market’s recent gains, the fear of losing a lot of money again continues to leave many consumers on the sidelines, Sri-Kumar said.
“People need to get a good rate of return on their investments to support future spending needs and they’re not going to get that from their bank accounts or fixed income,” he said. “They need to be encouraged to come into the equity market again.”
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