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A Bear Market for Mom & Pop Investors

Posted By Barry Ritholtz On June 9, 2014 @ 9:15 am In Investing,Markets,Psychology,Sentiment | 13 Comments

Last year, we noted that there was a “Bubble in Bubble Calling [1].” News media bubble chatter was the rage, whether it was tech initial public offerings [2] or stocks [3] or bonds — all caused by “a global central bank QE bubble.”

Here we are two quarters later, with the central bank reducing quantitative easing by scaling backs it asset purchases. Markets have reached new highs, which is a highly bullish sign [4]. The jobs lost in the great recession have been recovered, and economic data continues to trend positive.

Despite this, we still hear bubble chatter. Yet when we look at what individuals are doing with their investments, their behavior is definitely bearish. According to a study published in the Financial Analysts Journal [5], equity ownership has fallen to the lowest level in more than a half-century. In 2012, investors held a mere 37.7 percent of their portfolios in equities. That was out of a grand total of $90.6 trillion in investable assets around the world.

Over the past three decades, investors’ portfolio equity exposure has run at a historical average of about 60 percent. Think of this as the classic 60/40 stock-bond allocation.  continues here [6]


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URL to article: http://www.ritholtz.com/blog/2014/06/a-bear-market-for-mom-pop-investors/

URLs in this post:

[1] Bubble in Bubble Calling: http://www.bloombergview.com/articles/2013-11-19/the-bubble-in-bubbles

[2] tech initial public offerings: http://www.bloombergview.com/articles/2014-04-16/do-you-see-a-bubble

[3] stocks: http://www.bloombergview.com/articles/2014-04-02/irrational-non-exuberance-for-stocks

[4] bullish sign: http://www.bloombergview.com/articles/2014-03-05/no-market-highs-are-not-a-bad-sign

[5] Financial Analysts Journal: http://www.cfapubs.org/doi/sum/10.2469/faj.v70.n2.1

[6] continues here: http://www.bloombergview.com/articles/2014-06-09/the-bears-haven-t-surrendered-yet

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