When their monthly account statements begin arriving in the mail next week, investors will be staring at a collective $2 trillion loss.
It shouldn't come as a surprise that there will be some damage on the bottom line.It will be the first time, however, that many people see their share of the loss tallied, down to the penny, in print. How they react to that swift kick in the portfolio may have a lot to do with whether stocks add to Tuesday's rebound or sink farther into the first bear market since 1990.
For a bull market that's always depended on the pluckiness of investors, it could mean trouble if they start thinking twice before uttering mantras such as "I'm in it for the long haul."
"We'll see if they're really long-term investors as they say they are," said Robert Streed, senior investment adviser at Northern Trust in Chicago, noting that major mutual fund companies are reporting a shift away from stocks.
While there has been no immediate sign of panic among individual investors, August did mark the first month in eight years that they've withdrawn more money from stock mutual funds than they've deposited, according to the market research firm Trimtabs.
"The most important thing is that the money stays in the financial system. If it goes from stock funds to bond funds, that's a short-term problem. Eventually that money flows back into stocks," said Streed. "We'd be worried if that money started going into apartment buildings or oil wells."
At least two prominent investment strategists stepped forward after Monday's 512-point tumble by the Dow Jones industrial average to assert that a "buy the dip" credo is not yet a thing of the past.
Abby Joseph Cohen, the chief market strategist at Goldman Sachs and the most noted "bull" on Wall Street, recommended that investors shift available cash into stocks, maintaining that a mounting global economic crisis won't push the United States into recession. Prudential Securities chief investment strategist Greg Smith also raised his stock allocation.
While Tuesday's 288-point rally by the Dow helped wipe out a chunk of Monday's loss, the U.S. stock market is still down $2 trillion - an amount greater than Britain's gross domestic product - since July's peak, according to the Wilshire Associates index of all companies listed on major American exchanges.
With all the Armageddon-type commentary swirling about - Sam Donaldson of ABC News was predicting "The Great Depression II" on Sunday morning - it's hard not to get intimidated.
That's not to say, however, that the onset of fear will be lasting. Just months after the 1990 slide and even the "Black Monday" crash of 1987, Wall Street was back on track.
Billionaires lose big
From corporate tycoons to regular folks, investors have collectively lost $2 trillion in the stock market's plunge since mid-July. Following is a list of some famous billionaires, their principal holdings, and their total losses through Tuesday since the Dow industrials peaked on July 17. In parentheses is Tuesday's performance.
- Warren Buffett, chairman and CEO of Berkshire Hathaway Inc., $6.74 billion ($430.4 million gain).
- Bill Gates, chairman and chief executive of Microsoft Corp., $4.27 billion ($1.44 billion gain).
- Phil Knight, chairman and CEO of Nike Inc., $1.52 billion ($29.9 million loss).
- Ted Turner, vice chairman of Time Warner Inc., $1 billion ($157.9 million gain).
- Michael Dell, chairman and CEO of Dell Computer Corp., $946.7 million ($863 million gain).
Source: Most recent proxy statements filed with the Securities and Exchange Commission and analyzed by Associated Press.