Heavy into Equities

Retail is heavily overweight equities.  The Fed issues a quarterly review of the financial accounts of United States which includes flow of funds and the levels of financial assets and liabilities for households.  The numbers surprised me.  I bought into the belief that more money flowing into bond funds and out of stock funds since 2008 was a rebalancing by households as stocks went higher.  But it pales in comparison to the amount that equities have rallied compared to fixed income.  It really has been a TINA market, There Is No Alternative.

In essence, for retail, as of 2017 Q2, they are holding more in equities ($16.9 trillion ) than checking, savings and money market funds ($1.1 + $9.1 + $1 trillion) and bonds ($3.9 trillion) combined.  For reference, in 2009 Q4, they held $7.2 trillion in equities, $0.9 trillion in checking, $6.7 trillion in savings, and $1.4 trillion in money market funds, and $4.6 trillion in bonds.  Basically, households have more than doubled their allocation to equities while reducing their allocation to bonds over the past 8 years.

What is interesting is that even at the peak in the S&P in 2007, household equities holdings was still at $6.1 trillion, which is less than at the end of 2009 ($7.2 trillion), when the S&P was much lower.  So it has been a long term trend of households rebalancing towards more equities and less fixed income over the past 10 years, regardless of what the stock market has done.

This runs counter to the claim that this is the most hated bull market in history.  The flow of funds is speaking loudly, and it is overweight stocks.

We have hit another new high today.  It's another day, another new high.  VIX is below 10, so no need to start looking for a top.  I will not try to pick a top and go short unless I see more volatility.  This is a nightmare market for shorts, and a pretty bad market for traders.  It is heavenly for buy and hold investors.  The trader's time to shine will eventually come.  Make sure you are one of the traders left with sufficient capital to take advantage of the other side of the mountain.  That is why I am doing very little here, especially in S&P.  I see a few opportunities here and there in other markets, but nothing to get excited about.