The equity party is over.
After a 25-year bender in which stocks catapulted Wall Street to such dizzying heights that financial firms managed to tip off a worldwide recession, the cult of equities is declining in earnest. The resulting hangover could fundamentally change the game for Wall Street.
In the 1970s investors were disillusioned by a crushing bear market and high inflation. Large investors for the most part held conservative portfolios that were heavy on bonds and managed by the big banks; retail investors were yet to turn out in full force. The advent of the individual retirement account and other defined contribution plans would change that in the coming decade, creating a new class of investor eager to get into the equity game. In 1985 individuals held $750 billion in IRA and DC plans; by the market peak in 2007, that number had rocketed to $9.2 trillion.
But stocks’ modern-day surge really began in the 1980s and led to a golden era for Wall Street. The crash of 1987 was a mere blip, after which equities continued their upward climb, nudged forward by a new class of stock investor who became hooked by how equities seemed to outperform other investments, often dramatically. Banks that issued, sold and traded stocks became huge generators of power and wealth, domestically and globally.
Throughout the 1990s venture capital financiers continued to feed the IPO beast. In 1995 there were 921 IPOs worth $74 billion worldwide; by 2000 there were 2,000, valued ....