The joys of repetition

A trader walks the floor of the New York Stock Exchange (NYSE) just before the opening bell on August 12, 2011 in New York City.

Kai Ryssdal: We've said this before, we'll say it again. In fact, repeat after me: The markets are not the economy, and the economy's not the markets.

So while the major indices did have a perfectly lovely session at the corner of Wall Street and Broad, that doesn't mean that confidence about the markets or the economy has bounced back as well.

Marketplace's Eve Troeh explains on what kinds of mind games are at play.


Eve Troeh: Last Monday, financial planner Jennifer Hartman says most clients wanted to talk. They fell into two camps; let's call one Camp Resilient.

Jennifer Hartman: Clients who told me, 'we've been though this before, you helped us get it through before. We understand we're going to be fine.'

The other: Camp No More.

Hartman: Which is 'I can't take this again. I need help, I can't take this again.'

She says no one got out altogether. Some did move money around. And today, a week later?

Hartman: I haven't had any phone calls or emails yet today.

Silence.

But don't mistake that for relief. She says clients likely want to see how the whole month will shake out.

Wall Street Journal columnist Jason Zweig disagrees with most analysts who call investors scared.

Jason Zweig: I think investors are angry.

Think of it as a marriage: Since that big fight back in 2008, some investors are resigned to rocky times, but they're sticking with it. For others, every fight now triggers the word "divorce."

Zweig: When people are angry, they do impulsive, impetuous things.

But that $40 billion or so that left the market last week? He says that wasn't divorce. Not yet. More like a temper tantrum to send a message.

Zweig: They don't trust politicians to do what's right. They don't trust regulators to make hard decisions. They don't trust Wall Street itself.

Zweig says investors are sick of officials and bankers telling them to be confident when they still have bruises from the 2008 tumble.

The pain of the fall makes a bigger impression than the recovery, says author William Poundstone. In his book Priceless, he compares losing stock value to jumping in cold water.

William Poundstone: It feels freezing the first time you jump in the pond, no matter how many years you've jumped in that same pond. Likewise, any time you lose 6 percent of your retirement account in a given day, even if you have memories of that happening before, it's still going to sting.

That sting could mean holding off on a new TV, or new clothes or a car -- a lack of confidence that shows up in the everyday economy.

I'm Eve Troeh for Marketplace.

About the author

Eve Troeh is News Director at WWNO-FM in New Orleans, La., helping build the first public radio news department in the station’s 40-year history. She reported for the Marketplace Sustainability Desk from 2010 to 2013.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...