The stock market collapse in 2008 and early 2009 appears to have inflicted far more psychological damage — damage that may have been intensified by the collapse of home values and the deep recession that hit the country, and by the fact that many stocks had not recovered the highs they had reached in 2000. For perhaps the first time since the late 1970s, many Americans seem to have become pessimistic about the future of their country.
For the 10 years through 2010, figures for the final two weeks of the year will determine whether there was any net investment in domestic stock funds. (The estimate for the decade so far is that $4 billion flowed out.) By contrast, in the 10 years before that, Americans put $1.3 trillion into such funds.
In some ways, the current mood is reminiscent of the one that prevailed then. In 1979, Business Week published a cover article on the “Death of Equities,” which it attributed in large part to rising inflation. By 1982, inflation had begun to fall, but the country was in a deep recession. That is when the great bull market of the 1980s began. Few investors seem confident that such a renewal of optimism is likely this time.