Main St. not helping Wall St.

Everyday investor scared to buy, stays with alternatives

Wall Street pros have been doing the buying of stocks, and they are getting antsy, worried that the rally could slow or even end.

NEW YORK -- The stock market is missing you.

Today is the third anniversary of the Dow Jones industrial average's low point during the Great Recession. For more than three years, ordinary investors disgusted with wild swings have pulled money out of stocks. They've missed a breathtaking bull market: The Dow has almost doubled since March 9, 2009.

In the meantime, corporate America has racked up double-digit profit gains. If investors valued stocks at normal historical levels based on profits, we would be celebrating Dow 15,000, not Dow 13,000.

But the profit explosion is over, and the Wall Street pros who trade stocks mostly for big institutions and the rich are getting antsy. They've been doing the buying. And if Main Street doesn't join them, the historic rally could slow or even end.

Everyday investors "are more aware of the risk of the market," says Howard Silverblatt, senior index analyst at Standard & Poor's. "They're nervous. They're scared."

The Dow closed above 13,000 last week for the first time since May, 2008, four months before the financial crisis. In a way, the milestone was disappointing: Profits are at an all-time high, yet the Dow is below its record of 14,164, set in October, 2007.

Even though profits are growing, individual investors aren't buying.

Jeffrey Kleintop, chief market strategist at LPL Financial, one of the nation's largest brokerages, thinks the market won't reach a record anytime soon. First, "people need to embrace stocks," he says. "Maybe next year."

One measure to watch is the flow of money in or out of U.S. stock mutual funds. From June through January, investors pulled $137 billion more from these funds than they put in, according to Strategic Insight, an industry consulting group.

Their apparent skittishness has led to less trading. About 3.9 billion shares of stock have traded on an average day this year at the New York Stock Exchange, down a third from three years ago.

The refusal by ordinary investors to buy stocks is even more surprising when you consider how little they're making from the alternatives. Their favorite assets of refuge -- CDs, money market funds, and U.S. government debt -- don't even throw off enough interest income to compensate for inflation.