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Stock Trading Slowdown Is Steepest in Two Decades Most Investors Are Staying Out

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07/26/2009 10:13 PM
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Stock Trading Slowdown Is Steepest in Two Decades Most Investors Are Staying Out
July 24 (Bloomberg) -- Stock trading in the U.S. hasnít slowed this much midyear in at least two decades, causing some investors to worry that the steepest Standard & Poorís 500 Index rally since the 1930s will fizzle.

The CHART OF THE DAY shows 84 percent as many shares changed hands daily on the New York Stock Exchange between May 1 and July 20, compared with the average from Jan. 1 to April 30. Thatís the steepest slowdown since at least 1989, according to data compiled by Harrison, New York-based research firm Bespoke Investment Group LLC.

Trading on the NYSE was the slowest of the year on June 12 as the S&P 500 climbed to a seven-month high. The benchmark index for U.S. stocks then dropped 7.1 percent through July 10, when investor optimism on the equity market fell to the lowest level since March, according to data compiled by Bloomberg. The S&P 500 is up 44 percent since March 9.

ďPeople havenít really drunk the Kool-Aid yet,Ē said Michael Mullaney, who manages $9 billion for Fiduciary Trust Co. in Boston. ďIím not expecting us to break out of any range anytime during the summer. Before we go gung-ho bullish on the marketplace, weíre going to have to see volumes improve.Ē

U.S. investor confidence, as measured by the Bloomberg Professional Confidence Survey, dropped this month after the World Bank said the recession will be deeper than previously forecast. The nationís jobless rate reached a 26-year high in June and consumer optimism unexpectedly decreased.

Trading usually slows this time of year. Average daily trading from May through July 20 trailed the first four months in 13 out of 21 years examined by Bespoke. In 2008, midyear volume was 85 percent of the pace in the first four months. The S&P 500 plunged 38 percent during the entire year, the most since 1937.

[link to www.bloomberg.com]