To the
extent that the Fed-driven, six-year rally restored some semblance of trust
between retail investors and Wall Street, it was wiped away for good on Monday
when, in a harrowing day of flash-crashing mayhem, the perils of broken,
manipulated markets were laid bare for all to see and to add insult to injury,
the ETF pricing model blew up causing some funds to trade far below NAV.
Given that, and given how
predisposed household investors are to mistrust Wall Street in the post-crisis,
post-Flash Boys world, retail outflows during uncertain times (like those that
began last month when China’s stock market collapse began to make national
news) shouldn’t come as a surprise, but as Credit Suisse notes, something happened
in July and August that hasn’t happened since Q4 of 2008: retail investors
pulled money from both stocks and bond funds.
In other
words, mom and pop were selling everything
