Stock Rally Is Cold Comfort for Wall Street

NEW YORK (TheStreet) -- It almost feels like they could take away the police guard from the charging bull sculpture located on Broadway just below Wall Street.

The S&P 500 just hit a four year high. Shares of Goldman Sachs(GS) and Morgan Stanley(MS) are up 12.19% and 16.46%, respectively, over the past month. Bank lending is on the rise.

Heck, buyout tycoon Mitt Romney is even starting to climb in the polls.

But there are other, more powerful signs, suggesting a return to anything resembling pre-crisis Wall Street is hard to fathom.

Investor pessimism about Wall Street hasn't changed even slightly since the stock market bottomed in March 2009.

Both Morgan Stanley and Goldman trade at price-to-tangible book valuations that, according to a report this week from Bernstein Research analyst Brad Hintz, "were last seen during the depths of the financial crisis when both firms were at risk of failure."

Equity trading volumes are another sign investor confidence is in the toilet. August volumes are headed toward the lowest monthly average since Sept. 2007, according to a report Wednesday from Sandler O'Neill analyst Richard Repetto. While this is partly a reflection of lower volatility, Repetto also makes a strong case that investor confidence is to blame. He points to the State Street Investor Confidence Index, which is at its lowest since Dec. 2008, and $16 billion in flows out of equity mutual funds so far in the quarter.

"We suspect the lack of investor confidence is one of the key drivers of soft equity volumes," Repetto writes.

Meanwhile, attacks on the banking industry are unrelenting, as Rochdale Securities analyst Dick Bove lamented in a research noted published Wednesday.

"The drumbeat continues with banks and bankers being put under greater scrutiny than any other business possibly in the history of this country," Bove writes.

And yet all the scrutiny seems to accomplished little, other than further gumming up the gears of the U.S. economy.