Despite occasional surges in the stock market, the trend has mostly been a downward spiral of gloom and despair. The technology-drenched Nasdaq has plummeted more than 25 percent this year. As a result, investors have been running for shelter. But that flight to safety is a little backward.
A year ago, when stock prices were sky high, investors were loading up on risk, justifying enormous valuations even though the stocks could–and did–lose most of their value. Ordinary investors were clamoring for a piece of that riskiest market—initial public offerings.
Now investors distrust tech stocks even though they’re at more normal prices, and therefore, have less potential to plunge. Few IPOs can come to market, and individuals shun them. How risky is an investment in Cisco Systems now, with its stock around $13, compared with a year ago, when its stock was at $72?