Nervous Canadian investors sitting on excess $45 billion in cash while waiting out market volatility: CIBC World Markets Canadians likely missing out on billions in investment opportunities
TORONTO, May 7 /CNW/ - CIBC (CM: TSX; NYSE) - A highly volatile stock market has nervous Canadian investors pulling back on their investments and sitting on record amounts of cash, finds a new CIBC World Markets consumer watch report. The report finds that Canadians are holding onto a record $45 billion in extra cash they normally would invest in the markets - a decision that could cost them billions of dollars in lost investment opportunities. "Despite the recent recovery in the stock market, Canadians are still sitting on cash positions which in real terms are 15 per cent higher than the already elevated level seen in 2001," says Benjamin Tal, senior economist at CIBC World Markets and author of the report. "The October 1987 stock market correction lasted two months, but investors sat on their newly created mountain of cash for a lengthy 16 months, during which time the stock market gained more than 20 per cent. Ditto for the 2001 flight to safety." By his calculations, sitting too long on the sidelines after the 2001 market correction, cost Canadian investors more than $30 billion - a pattern he sees emerging again in 2008. "Fast forward to today's situation and it appears that history is repeating itself. Investors are sacrificing billions of dollars in potential investment gains," Mr. Tal adds.
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