Well I think a massive factor is the daily bombardment of negative news we receive about the state of the economy. All we hear about are job losses, houses not being sold, companies going bust, people spending less on the high street, and so on. As a result there's little reason for anyone to be blindly optimistic about the future of any stock market listed company.
Sentiment is a huge factor in how well share prices perform generally, but with prices currently so cheap, there has to come a time when value comes into the equation when assessing a company's share price. If you look at the current prices of some of our largest companies, you will find that a lot of them are currently trading at ridiculously low price/earnings ratios. Even if you take into account the fact that profits may fall in the next few years, you will find that a lot of these companies are still significantly undervalued.
So the reason people are not buying is not because companies are overvalued. It's more likely to be because people are just not in the right frame of mind to be overly optimistic about the future of businesses in general.
Another reason why people are not really buying shares at the moment is simply because a lot of them are finding that they can do just as well trading shares over shorter time frames. It's easy to see why because the stock market is so volatile at the moment, with price moves of between 10% and 20% not out of the question.
There are no shortage of trading instruments either with options, futures and spread betting just three examples of how you can trade shares on a relatively short-term basis. Plus of course you can even profit from buying and selling shares in the conventional manner because prices can move extremely quickly in these markets.
So overall it's easy to see why people are reluctant to throw their money into the stock market at the moment. The state of the economy leaves little room to be optimistic and a negative economic outlook does not really make investing a worthwhile activity, even if a lot of companies are hugely undervalued. The other main reason is because the buy and hold strategy is not as popular as it once was, particularly in these markets, and people are choosing to trade on a shorter term basis instead.
If you would like details of the most useful stock market tools and resources, please read James Woolley's Marketclub review and ADVFN review.
Tags: investing, finance, stocks, stock market, trading, shares, buy shares, stock market investing, share trading