RETAIL INVESTOR CONSENSUS: Rotation To Equities Is Complete

 

It looks like the American retail investors have now gone all-in on stocks according to BlackRock’s chief strategist Russ Koesterich on ETFdb:

” According to the Fed’s data, the share of household financial assets devoted to cash and highly-rated government bonds has been drifting lower since the end of the financial crisis and has actually fallen below the long-run average.”

” Meanwhile, the same Fed data also show that investors have steadily moved into ever riskier investments, especially during the recent equity bull market. Americans now hold the largest percentage of their financial assets in stocks, corporate bonds and mutual funds – a loose proxy for exposure to riskier investments – since the third quarter of 2000, near the height of the tech bubble. The percentage of investors’ financial assets in such riskier investments is now 34.9%, just shy of the highest exposure to risky assets since the 1950s – 38.4% in the first quarter of 2000.”

We’ve seen this before. Stock make a big-time move. The retail investor hears stories from their neighbour and work colleagues about how they are making a killing on stocks. The retail investor feels guilty on missing out and feels like an outsider. The retail investor to overcompensate, buys stocks regardless of valuation, business operations or financial fundamentals. The make a few dollars that strokes their ego. Unfortunately the story ends badly as a catalyst then takes the market down. Fear sets in the sell everything they got…and then blame their advisor. You can set your watch to it.

If the data is showing us that the retail investor is going all in on stocks, then we need to become concerned. They’ve finally arrived at the party but they are probably too late.

Here’s BlackRock’s chief strategist Russ Koesterich at ETFdb: According to the Fed’s data, the share of household financial assets devoted to cash and highly-rated government bonds has been drifting lower since the end of the financial crisis and has actually fallen below the long-run average. Meanwhile, the same Fed data also show that investors have steadily moved into ever riskier investments, especially during the recent equity bull market. Americans now hold the largest percentage of their financial assets in stocks, corporate bonds and mutual funds – a loose proxy for exposure to riskier investments – since the third quarter of 2000, near the height of the tech bubble. The percentage of investors’ financial assets in such riskier investments is now 34.9%, just shy of the highest exposure to risky assets since the 1950s – 38.4% in the first quarter of 2000.