A flurry of bad economic news sent investors rushing out of the stock market and into bonds last week, accelerating a trend that began months ago as evidence began accumulating that the economic recovery is faltering. Some analysts say this is just a predictable short-term reaction to bad news; others say it is the beginning of a long fall for equities as the weak economy causes people to move more of their money into government bonds. Have Americans lost their stomach for the stock market? (Watch a report about the declining market)

Yes, the recession damaged our faith in stocks: Wary investors have pulled a "staggering" $33.12 billion out of domestic-stock mutual funds this year, despite decent corporate earnings, says Graham Bowley in The New York Times. Apparently, the Great Recession has killed our "generation-long love affair with the stock market" — and it may be decades before we return.
"In striking shift, small investors flee stock market"

The death of stocks has been exaggerated: There's no question that, in this lousy economy, people are becoming more careful, says Tom Petruno in the Los Angeles Times. But we still put $724 billion into stock funds in the first half of 2010 — that's 29 percent more than we put into bond funds. "For a nation that supposedly has forsaken stocks, we're still shoveling a lot of cash in that direction."
"Still in stocks? You're hardly alone"

Stocks are risky, but so is everything else: Stocks are looking "unattractive" right now, says Joshua Brown at Forbes. "There are as many reasons to abhor stocks as there are to dislike bonds," but both are cash cows compared to the dismal real estate market. The best thing to do is be careful, diversify, and hunker down until the good times return.
"Stocks are from Mars, bonds are from Venus"