When the bond market blows up, investors will pile back into
equities Robert Buckland has heard that one before.
Its more complicated than that, says the
London-based chief global equity strategist at Citi Investment
Research & Analysis. If people think equities are
these horrible, scary things that lose you half your money
every seven years, its going to be tough to get them
Although stock markets have mostly recovered from 2008, many
investors still shun them and may keep doing so.
Buckland isnt bearish on equities, but he doesnt
expect a big comeback anytime soon. As he and his colleagues
noted in a recent report, U.S. equity mutual funds have seen
outflows for the past five years after inflows peaked at $309
billion in 2000. It also helps to remember that equities were
once a minority asset class. In 1952 private U.S. pension funds
held 17 percent of their total assets in stocks and 67 percent
in bonds. Those numbers reversed over the next half century,
but the tech wreck and two ruinous bear markets smashed the
so-called equity cult. Last year the same pension funds were 52
percent equities and 35 percent bonds.
Disdain for equities hurts the real economy by making stock
markets less competitive places to raise capital, Buckland
warns. He thinks the only hope is that investors will forget
their equity losses: It could potentially take a
generation for those scars to heal.