LIVE MARKETS-Retail investors boost stock exposure to highest since 2017
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RETAIL INVESTORS BOOST STOCK EXPOSURE TO HIGHEST SINCE 2017
Retail investors leaned a bit further into stocks in September, trimmed their cash holdings and modestly increased their bond exposure, according to the latest American Association of Individual Investors (AAII) asset allocation survey.
Stock and stock fund allocations increased to 71.7% from 71.1% in August, while bond and bond fund exposure edged up to 14.8% from 14.6%. Cash positions, meanwhile, fell to 13.3% from 14.3%.
The move pushed equity exposure to its highest level since December 2017, when AAII members reported a 72.0% allocation to stocks.
As investors put more money to work, the stock-to-cash ratio climbed to 5.39 from 4.97 in August, marking its highest reading since December 2017, when it reached 5.53. The increase reflects investors' continued preference for stocks over cash.
To be sure, these measures are not particularly reliable market-timing tools. Still, they can provide useful context. Over the past decade, peaks in the stock-to-cash ratio have often coincided with periods when the market became more susceptible to volatility. In several instances, the ratio failed to confirm new highs in stocks ahead of more significant pullbacks.
The latest survey suggests retail investors remain firmly tilted toward equities, with cash allocations at their lowest level since December 2017. That leaves investors entering October, a month known for bouts of market turbulence, with stock exposure elevated and cash cushions relatively thin.
At the same time, individual investors appear to be growing somewhat less pessimistic. AAII's weekly sentiment survey, released last Thursday, showed bearishness eased, though bears still outnumber bulls.
(Terence Gabriel)
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