March 5, 2013

Dow hits record, erasing Great Recession losses

The Associated Press

(Continued from page 4)

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Trader Peter Tuchman smiles as he works on the floor of the New York Stock Exchange on Tuesday. The Dow reached a new high Tuesday.

The Associated Press

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In the turbulent journey to new highs, Wall Street strategists and other experts have predicted many times that small investors were about to fall in love again with stocks. The "dry powder" of their money would set fire to an already hot market. After all, small investors had helped push stocks up in the great bull market of the '80s, which began in August 1982. Those who had left the market years earlier began buying again, and stocks more than tripled in five years.

They drove a bull market again in the 1990s. Stocks more than quintupled in 9 ½ years.

But small investors have not only stayed away the past four years, they have sold hundreds of billions of dollars of stocks.

Then, in January, as the Dow inched closer to its record, individual investors seemed to have second thoughts. They put nearly $20 billion more into U.S. stock mutual funds than they took out in January, according to the Investment Company Institute, a trade group for funds.

It was just a trickle, but it may have helped stocks surge. In January, the Dow rose 5.8 percent, and the S&P 500 rose 5 percent. It was the best start to a year for the Dow since 1994.

For good or ill, it's possible the Dow's new high might convince investors to put more money into stocks.

"When you hear about new highs, the greed factor kicks in," says Colas, the ConvergEx Group strategist. "It gets people to think, 'Do I own enough stocks?'"

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