OK, so October wasn't a great month.
But what is the mood of investors now that Black Monday is behind them and a new year of investment opportunities lies ahead?
"It's all over the place," said Lewis Wallensky, a financial planner in Century City. "I find it varies from pure despair to utter euphoria."
Wallensky knows someone who's euphoric ? He cites a client, a teacher approaching retirement, who came into the office to see how she stood shortly after the crash. Wallensky led her through her conservative portfolio, 80% of which is in tax-free bonds, single-premium insurance contracts and other investments with fixed returns.
"She walked out of here walking on air," he said. Even the individual retirement account she had invested in a mutual fund already had bounced back. She was in such high spirits she didn't blanch when she learned that the IRA had been worth about $5,000 more in September than it is now.
The occasional happy warrior aside, Wallensky says the best way to characterize the overall mood of his clients is "wait-and-see." Other observers of the investor psyche agree that inaction seems to be current investment strategy of choice.
"What people seem to be experiencing is immobilization," says Kathleen Gurney, president of Financial Psychology Corp. in Los Angeles. "They don't want to do anything now."
Gurney, a social psychologist, says the paralysis seems to be pervasive. Financial planners tell her that clients are putting off financial decisions about tax planning as well as investments.
"Clients don't want to talk to their financial planners," Gurney said. She cites the case of a planner who sent letters to his clients advising them of a strategy for saving several thousand dollars in taxes. He was amazed at the lack of response.
Michael R. Cunningham, a social psychologist at the University of Louisville in Kentucky, speculates that investors will continue to be of two frames of mind in the coming months: cautious and more cautious, depending on how recession-prone their jobs are.
"Even if you have money in the bank, you are not going to be investing if you think there's going to be a recession and your job is going to be affected by it," Cunningham says. He reasons that individuals in education, medicine and other relatively recession-proof fields will be less timid than those in heavy industry and other more vulnerable sectors of the economy.
Cunningham predicts that the mood of investors will be somewhat grim as they enter 1988, independent of the news from their brokers. He has studied the effect of seasonal changes on mood and has found that "it's very difficult to support a mood of great optimism at the beginning of January." January, he said, is just "one of the less-fun months."
Bad weather in much of the country is one reason that January is a relative bummer. "People tend to be in a better mood and more optimistic when it's sunny and warm," the psychologist explained. Post-holiday bills and fatigue from the end-of-the-year rush also contribute to the January blues.
Perhaps the only real cure for investor blues (best not use the term depression) is a robust economy. But Gurney believes that people feel better about whatever investments they make if their choices are in line with their individual "money personalities."
Gurney surveyed 20,000 Americans and found that they exhibited one of nine distinctive money-management styles or "money personalities": Gurney describes the nine styles in her book "Your Money Personality: What It Is and How You Can Profit From It," to be published by Doubleday in March.
In Gurney's view, "achievers"--people who want the most control possible over their money--are far more comfortable investing in residential real estate and commercial property than in individual shares of common stock or even mutual funds.
"Entrepreneurs," on the other hand, who are not put off by a high degree of uncertainty, can comfortably play the stock market.
"Psychologically people have to know who they are, and what their money-management style is," Gurney said. Not to know is to risk sleepless nights and worse.
Other psychologists agree that individual tolerance of risk is a major factor in how a person views his or her investments.
While caution seems to be the dominant mood among most of the investors Cunningham sees, he also knows some "macho types" who perceive a bear market as a grand opportunity, not a catastrophe. Their rule of thumb: Buy when the blood is running in the streets.
"Their self-image is often hooked up with being a savvy investor," Cunningham said. "They think it's better to take a loss than look like they are afraid to make a decision."
Perhaps one reason the majority of small investors would rather wait than choose is because their October losses tend to loom larger in their minds than earlier gains.
Stanford psychologist Amos Tversky and colleague Daniel Kahneman of the University of California, Berkeley, have done studies that establish that fear of loss is a potent force in economic decision making.
Tversky and Kahneman asked students to participate in a coin toss in which heads would win them $150 and tails would lose them $100. Most declined to flip even though the potential gain was one-and-a-half times the potential loss.
Somehow that comes as no surprise to veterans of Oct. 19.