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Goldman’s Cohen: Economy Scaring Investors Away From Stocks

Tuesday, 08 May 2012 07:33 AM

Economic uncertainty is scaring investors away from what would normally be a good place to park one's money — stocks, says Goldman Sachs chief equity strategist Abby Joseph Cohen.

Major stock averages have shot up since 2009, when the economy emerged from the recession, but many retail investors have pulled money out of equity funds at the same time.

The Flash Crash of 2010 — a technical phenomena that sent the Dow plunging and recovering in the blink of an eye — spooked many individual investors away, but the economy is keeping them from returning.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

"Overriding has been the fact that we have been through such a difficult time in the economy, when people are still so concerned about job losses, they're concerned about the very sluggish pace of economic activity here in the United States and ongoing recessions elsewhere," Cohen tells CNBC.

"Investors are quite nervous about the equity market."

Unsettling headlines out of Europe depicting a worsening debt crisis coupled with dismal jobs reports out of the U.S. aren't helping.

While the U.S. economy may be mired in "deceleration" it's "certainly not a recession," with growth in the 2 percent to 2.5 percent range.

"One of the things that will restore the confidence, I believe, will be not just supportive performance in the equity market — we are, in fact, double where prices were at the bottom — but also ongoing improvement in the economy," Cohen says, CNBC adds.

Others point out they notice a continued exodus away from many stocks funds.

"Investors remained scarred, scared and conservative coming out of the global financial crisis," says Gib Watson, chief executive of Envestnet Prima, an asset management research company, according to Reuters

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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