This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Japan Quake Adds to Litany of Investor Woes

NEW YORK (TheStreet) -- The crisis in Japan is weighing heavily on market sentiment, especially among retail investors whose confidence had already been shaken by the uprisings in the Middle East.

"This is what the market does. Whenever it gets comfortable, it gives you a gut check. That's what sets up the next run," said Jim Paulsen, chief investment strategist with Wells Capital Management,

Just last Wednesday, markets were celebrating a two-year bull run that had pushed stock prices back to pre-Lehman collapse levels. The retail investor had plenty of reasons to be optimistic -- strong corporate earnings growth, fair valuations, a slowly improving jobs outlook, a strong recovery in manufacturing and consumer spending and the threat of a double-dip recession that had haunted markets through most of last year was finally behind them.

But that confidence was tenuous at best. The cracks started to show as political unrest began spreading across the Middle East and North Africa in late January. Today, uncertainty on multiple fronts has investors nearly paralyzed. The focus is currently on Japan, where the death toll and destruction from its massive earthquake Friday continues to mount, threatening to cripple its debt-burdened economy further.

A nuclear crisis is also looming large, with Tokyo Electric's Fukushima nuclear power plant suffering serious explosions in the aftermath of the quake and subsequent tsunami. Experts are scrambling to contain radiation leaks.

Investors, have faced a continuous barrage of significant threats in the last few months and indeed, in the last three years. The European debt crisis and the flash crash made the summer of 2010 a rocky time for equities. And investors will likely never forget the months following the collapse of Lehman Brothers, when governments were forced to bail out banking behemoths or risk sending the global economy into an abyss.

"We have a populous that suffers from Armageddon fatigue, especially after two years of having another Armageddon every month to worry about," said Paulsen.

However, the market has proved to be relatively more resilient in the wake of the recent crises. Despite the recent spate of bad news, the Dow has so far not dropped more than 2% on any single day in 2011.

Contrast that to last summer, when the market suffered drops of more than 2% on six days between May and July, as investors dealt with the prospect of sovereign debt defaults. The May 6 flash crash drove the Dow lower by 3.2%.

Paulsen sees the relatively small correction in the market so far as a sign of underlying strength. "We've been preparing for the next Armageddon for two years. As bad as this is, it's not like anyone wasn't prepared. Nobody was overexposed to stocks and no one ran through their cash. Everyone is pretty hunkered down to begin with."

Economists in any case expect a slowdown in Japan's economy to have only a small impact on the U.S., given that trade with Japan has diminished in recent years.

John Canally of LPL Financial says investors are using Japan as an excuse to book profits after a steep run up in stock prices. "At the end of this, no one is going to say this(Japan's earthquake) is what dipped the world back into recession. No one expected much out of Japan before this," he said.

Stock quotes in this article: ^DJI, ^GSPC, ^IXIC, DIA, SPY, QQQQ 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs