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And Now The Small Investors Have Come Pouring Into Stocks

Saturday, June 8, 2013 - 8:28 AM
We’re finally starting to see the small investor chase equity returns.

Stock and stock fund allocations rose 3.5 percentage points to 65.2%. This was the largest allocation to equities since September 2007. It was also the fourth time in five months that stock and stock fund allocations were above their historical average of 60%.

Cash allocations fell 1.8 percentage points to 16.7%. Since hitting an 18-month high of 22.8% in March, cash allocations have declined by a cumulative 6.1 percentage points. May’s allocation was the smallest since November 2010. May was the 18th consecutive month with a cash allocation below its historical average of 24%.

And Now The Small Investors Have Come Pouring Into Stocks... - Business Insider

Evidently it's what Chairman Bernanke wanted to see occur. Getting people on Main Street to pour money into equities, feel the wealth effect, start spending and take out mortgages on homes. This is supposed to boost economic growth. Is it working, and will the markets keep going up, without a major correction or crash coming soon? (March 2000, October 2002, October 2007)
8
ShorebreakShorebreak2,674 posts since
Apr 6, 2010
Rep Points: 14,508
1. Sunday, June 9, 2013 - 2:16 PM
"Evidently it's what Chairman Bernanke wanted to see occur. Getting people on Main Street to pour money into equities, feel the wealth effect, start spending and take out mortgages on homes. This is supposed to boost economic growth. Is it working, and will the markets keep going up, without a major correction or crash coming soon? (March 2000, October 2002, October 2007)."

Good questions, SB.

The trigger for the recent increase in equity is simple: Greed.  When the market keeps its upward trend for a few years; it natually draws crowd with greed in their emotions.  I am not sure abut the hopeful/wishful results that people will start spending and taking out mortgages (especially in view that the mortgage rate has gone back up lately). 

But it will certainly build up the next bubble after 2007/2008; the pending correction or crash may be an ugly one.  Just my humble opinion.  And we all know the trigger for that correction/crash: Fed's ease on QE/bonds buying.
2
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
2. Sunday, June 9, 2013 - 9:51 PM
When the small individual investor starts buying stocks, it usually means we are close to the end of a bull market cycle. Who knows if that will prove right this time, but it has been historically true.

I am reminded about a story of Joseph Kennedy (John Kennedy's father) who in the late 1920's sold his entire stock portfolio after listening to a taxi cab driver in NYC tell him about how much money he was making in the market.
2
loulou552 posts since
Aug 3, 2010
Rep Points: 3,431
3. Monday, June 10, 2013 - 11:15 AM
Lou: Yeah, in the early 2000, my barber was discussing his fortunes from bio-tech investment.  But of course I am not Joseph Kennedy and lost a bundle in the subsequent stock market bloodbath.
2
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
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