Some financial pros say there is a possibility of a panic in the markets as the ongoing selling blitz hammers many sectors of the market.
While no one is suggesting that the markets are about to go over the falls, there is cause for worry.
Actually signs indicate that the beginnings of a selling panic may already be under way, judging from the latest numbers from liquidity tracker TrimTabs Investment Research of Santa Rosa, Calif.
For example, in the week ended January 5, jittery investors unloaded more than $20 billion worth of stocks in American companies, TrimTabs estimates. About $10.3 billion of the sales were by equity-oriented mutual funds that invest solely in American securities, while nearly $9.9 billion were from exchange-traded funds that also invest only in companies based in America.
These are the highest weekly sales since TrimTabs began tracking equity inflows and outflows in 1998.
"The public is delivering a loud and clear message," TrimTabs's CEO, Charles Biderman, says. "It's scared and it doesn't want to be in the American stock market."
Recent figures give credence to this observation. The latest American mutual fund sales represent an acceleration of December's outflows, when investors dumped an estimated $24 billion worth of such funds.
It marked the eighth month in a row of net outflows for mutual funds.
International equity funds, usually a haven for U.S. investors when they're fearful of the American market, also suffered sizable outflows in December, to the tune of $4.8 billion. It was the only American outflow of international stock funds last year.
TrimTabs's president, Conrad Gann, reckons the brisk selling of both stock-oriented American and international mutual funds is apt to pick up steam, given their abysmal showing. Hefty declines were experienced by these funds in November and December, a combined two-month period in which American funds fell 11.3% and international funds skidded 14.6%.
Gann also takes note of a number of specific investor worries, chief among them declines in retirement portfolios, fears of a recession, the housing crunch, slowing growth in personal income, stagnant employment growth, and the weak dollar.
"It's a difficult time to participate in American equities, since stock values fail to sufficiently reflect the weaknesses in the American economy," he says.
As a result, he tells me, "for the near term, at least, the selling trend in these funds should continue."
If there's an encouraging note here, Mr. Gann points to a similar consecutive eight-month outflow of American funds that ended in 2002, an event that marked the bottom of the bear market.