This chart shows how individual investors are positioned in equities.
Source
The chart starts in Nov. of 1987 which was after the big crash that year.
I would have liked to have seen what it looked like before the crash.
It was not until after 1990 that individuals really started to feel
comfortable with the market again. Despite the bigger moves down over
longer periods of time in the 2000s, the period of time before people
moved back into equities from an aggressively underweight was much
shorter. The crash of 87 did not even take out the 1986 low, whereas the
bear markets of the 2000s took out the lows many years back. And yet
people were much more wiling to buy again in the 2000s then they were in
the grandest secular bull market of them all. People keep claiming
this is the most hated rally ever. If that was really the case
shouldn't individual investors still be underweight? Some of the money
from equity mutual fund withdrawals went into ETF's and some into bonds
because of the aging population. It has nothing to do with hating the
rally. That aging population is highly likely why individual investors
are less overweight equities now then at either of the prior peaks in
2000 or 2007.
Check out this chart of pension plan allocations.
Source
Pension
fund equity allocation is much lower then in 2000 or 2007. They were clearly way, way overweight in equities for many
years. Every share of stock is owned by somebody. If individual
investors and pension plans hold a lower equity asset allocation then in
2007 who is holding all that extra stock? My guess would be hedge
funds and other traders both large and small. I would suspect some
readers are thinking, wow this is bullish people are underweight
equities. I don't think this is particularly bullish in any special
way. Every share is owned by somebody already. Will individuals or
pension plans bid up prices because they are underweight? I think that
will only happen if things take a big turn for the better in the
economy. However, I think this is a problem if we end up going in the
other direction. In downturns traders tend to sell stocks much quicker
then investors and pension plans. The more stock in the hands of
traders and less in the hands of long term investors is likely to increase
volatility in a bear market.
Bob
Trend table status
Trend | SP-500 | R2000 | COMPX |
Primary | Up 7/31/20 | ?- 3/31/20 | Up 5/29/20 |
Intermediate | Up 10/2/20 | Up 8/21/20 | Up 10/9/20 |
Sub-Intermediate | ? 1/4/21 | ? 1/4/21 | ?+ 1/4/21 |
Short term | ? 12/11/20 | ? 1/4/21 | Up 11/24/20 |
Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

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