Retail investors, after gutting it out through years of awful returns, have finally fled. In a normal market, retail participation – Mr. and Mrs. Public trading their personal accounts – should be about 20 per cent. That plunged in November and December, traders say.

It could be that Canadian investors suddenly and finally tired of the relentless volatility, or the long-term returns that have barely cracked positive territory.

Perhaps the most likely candidate for the drop-off is a decline in activity by the same high-frequency traders who helped boost volumes so dramatically in the preceding few years, and who now constitute roughly a third of the market by many estimates. So-called HFTs were drawn to Canada by incentives from markets such as the TSX, and by the opportunity to trade against investors big and small who weren’t wise to their tricks.

On Wall Street, risk is suddenly a four-letter word. Retail investors can't stomach it. Pension plan sponsors are allocating away from it.

That's bad news for stocks. Volume has been dropping almost nonstop for three years and shows no signs of improvement. The situation is worse than it was following the crash of 2000. It's worse than it was after the crash of 1987. Fearful of the future and still wincing from 2008, investors are moving funds into bonds, commodities, cash, private equity, hedge funds and even foreign securities-anything but U.S. stocks.

"Our bread and butter is the retail investor," Scott Wren, a senior equity strategist at Wells Fargo Advisors, one of the country's four largest retail brokerages, told Bloomberg Radio recently. "They're not jumping into the market. They're not chasing it. Those who have been around for a little bit have been probably burned twice here in the last 10 years or so. They're definitely gun-shy. They're not believers. I'm not sure what it's going to take to get them back in the market."