REBOUND ON WALL STREET : Staying Cool : Small Investors Resisted Their Impulse to Flee
The average individual investor took Friday’s 190-point slump in the Dow Jones industrial index like a trouper, choosing to tough things out in Monday’s turbulent stock market rather than unload his holdings, according to mutual fund managers and banking officials interviewed Monday.
Few banks saw any unusual increases in deposits or a sudden demand for certificates of deposit.
“It is really business as usual today,” said Chuck Lemoine, spokesman for Security Pacific National Bank. “There is nothing out of the ordinary.”
Bank officials said any increase in deposits would not be known until this morning after computers tally Monday’s business.
Mutual fund managers reported a high volume of transactions Monday but nothing comparable to the panic selling that occured after the Dow index fell 508 points on Oct. 19, 1987.
“There was heavy selling in the morning,” said Laurence Dwyer, a spokesman for the Boston-based Fidelity Investments, the nation’s largest mutual fund company.
“Still the selling was only one-third as heavy as the crash in October 1987. . . . By the end of the day, there were slightly more buys than sells.”
Fidelity polled its customers to determine attitudes in the wake of the market decline Friday, Dwyer said. The poll found 84% were investing for the long term.
The reaction Monday to the stock market slide was considerably different from two years ago when investors fled to more traditional investments such as certificates of deposit and Treasury bills.
“There was more activity than usual but not nearly as much as expected,” said James Benham of Benham Capital Management Group, a Mountain View, Calif.-based mutual fund.
The biggest lesson from the Oct. 19, 1987, stock market crash appears to have taken hold Monday--those who rode out the storm and stayed in stocks made much bigger profits than the people who panicked and headed for safer ground.
The Dow index was up 60% from the October, 1987, crash prior to Friday. By comparison, 30-year Treasury bonds have paid annual yields of no more than 10% during that time. “The people who did sell out after the Oct. 19 drop regretted it, and if they got back in the market, they don’t want to make the same mistake again,” said Jerry L. Jordan, chief economist with First Interstate Bancorp in Los Angeles. “And the people who stayed in the first time are going to want to do the same thing this time.”
Branch managers for Wells Fargo Bank in Encino and Pasadena were taking calls from worried investors but few said they were quite ready to give up on the stock market.
“Everybody is getting inquiries, but no dollars,” said Kathleen Shilkret, spokeswoman for Wells Fargo. “The best anybody is doing is calling.”
