Households are Loaded to the Gills with Stocks

By John Del Vecchio and Brad Lamensdorf

Household ownership of stocks has hit a new high. One might think this is a good thing as Americans have increasingly invested in the market to save and build wealth.

It turns out to be a contrary indicator. Especially at new peaks.

The chart below, courtesy of SentimenTrader, shows that household equities as a percent of total financial assets just hit 36.5%. That exceeds the previous high set around the Internet Bubble of 32.5% in 2000 and the 29.7% mark during the growth stock boom of the late 1960’s.

Equities account for record % of assets

The prior two peaks saw 10-year annualized returns in negative territory for the S&P 500.

Meanwhile, periods such as 1975 and 1982 where households dumped stocks were met with massive forward gains. Even 2009, which dropped household equities below 20% created a generational buying opportunity.

We are far from those periods. The current situation calls for caution and we continue to believe the stock-picking and alternative strategies will out-perform plain vanilla indexing in a big way over the next cycle.

Originally Posted on June 29, 2021 – Households are Loaded to the Gills with Stocks

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