Individual investors tap the cash well
Nasdaq advances ~0.8%, S&P 500 modestly higher, Dow edges up
Comm Svcs leads S&P 500 sector gainers; Energy weakest group
Euro STOXX 600 off ~0.2%
Dollar dips; bitcoin falls >3%; crude up; gold gains >1%
U.S. 10-Year Treasury yield slides to ~4.28%
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INDIVIDUAL INVESTORS TAP THE CASH WELL
The American Association of Individual Investors (AAII) surveys its members monthly as to their asset allocation. This survey can offer important clues about how confident, or cautious, investors are.
Here is a table showing the percentages investors allocated to stocks, bonds and cash for the most recent two months:
JUNE | MAY | |
STOCKS AND STOCK FUNDS | 70.5% | 70.4% |
BONDS AND BOND FUNDS | 14.5% | 13.8% |
CASH | 15% | 15.8% |
From a contrarian perspective, relatively low levels of cash can suggest investors are fully invested and complacent ahead of what could be an equity market top. High levels of cash can suggest investors are defensive and scared ahead of what may be an equity market low.
At this time, the S&P 500 .SPX has been making all-time highs and the level of cash, at 15% in June, is at its lowest level since a 14.2% reading in November 2021:
Of note, the Nasdaq .IXIC put in major highs in November 2021, which were not surpassed until earlier this year. The Russell 2000's .RUT November 2021 highs have yet to be exceeded.
Additionally, just looking back over the past 10 years or so, significant S&P 500 declines that began in May 2015, January and October 2018, February 2020, and January 2022, were preceded by major individual investor cash troughs in the 13% to 14.8% area.
Thus, an uptick in cash levels will likely catch traders' attention. If individual investors were to begin building cash in such a way that the level exceeds October 2023's 19.73% reading, it would end the pattern of declining peaks and troughs in their cash position from the October 2022 high, and may well coincide with a rise in fear leading to another sharp market slide.
(Terence Gabriel)
*****
FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:
JOBS REPORT AS BAKED ALASKA: HOT ON THE OUTSIDE, COOL AT ITS CORE - CLICK HERE
U.S. STOCKS SUBDUED EARLY AS THEY SORT OUT PAYROLL DATA - CLICK HERE
FRENCH ELECTIONS: A FISCAL BALLET INFLUENCING MARKET RHYTHMS? - CLICK HERE
U.S. STOCK FUTURES DIGEST LATEST JOBS DATA - CLICK HERE
NEXT PIT STOP FOR NEARSHORING - CENTRAL AND EASTERN EUROPE - CLICK HERE
NEXT UP: PAYROLLS - CLICK HERE
UK LABOUR'S WIN: A BURDEN FOR DIVERSIFIED FINANCIALS AND INSURANCE, A RELIEF FOR UTILITIES - CLICK HERE
THE RISE OF THE MODERATES, EYES ON FRANCE - CLICK HERE
EUROPEAN STOCKS HIGHER, BRITAIN'S MID-CAPS HIGHEST SINCE APRIL 2022 - CLICK HERE
EUROPEAN STOCK FUTURES HIGHER; ELECTIONS, PAYROLLS IN FOCUS - CLICK HERE
STARMER'S STEADY START - CLICK HERE
AAIIAA07052024 https://tmsnrt.rs/3VPFcgF
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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