Risk Latte - Death of Equities

Death of Equities

Rahul Bhattacharya
Jun 09, 2005

The decade of the 1970s was a dark period for equity markets. Equity markets stagnated and generated almost no return. Investors, big and small, in the United States withdrew a little bit of money, month after month, from the mutual funds and they did so for eight long years. Wall Street was plunged into one long depression. Even the professional mutual and pension fund managers showed no interest at all in equities, and by 1979 of the money managed by pension funds, 90% was invested in bonds, bills and cash.

In the summer of 1979, BusinessWeek ran the famous but morbid cover story: "The Death Of Equities".

Ironically, the resurrection of the faith in equities began almost simultaneously. Three month after the article, mutual funds finally, after almost a decade, took in more money from the investors than they redeemed. Avery small amount though, this was the turning point and this ushered in the era of the greatest bull market of all times, which barring a few short term plunges, lasted for almost twenty years.

This shows that financial journalists are perhaps, the biggest analysts of all.

(Taken from: Origins of the Crash Roger Lowenstein).

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