From the desk of Willie Delwiche.
The January AAII asset allocation survey shows household equity exposure rising for the third month in a row and climbing to its highest level since May.
Why It Matters: Despite last year’s stock market turmoil and claims of pessimism, investors did not abandon equities. After approaching a 20-year high in November 2021, stock exposure waned over the course of 2022 but never did drop below its long-term average. Historically, the best gains in the market come after investors become bearishly positioned (stock exposure down and cash exposure elevated). That is a pivot that has not taken place this cycle (not yet, at least). The under-owned and unloved asset classes remain bonds and cash (and commodities, which don’t even make it as a category in the AAII survey).
In this week’s Sentiment Report we take a closer look at the implications of this positioning data, how investors are responding to stock market strength this year and what valuations tell us about risk and opportunity in the current environment.
