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.