Is This A Blip, Or Is Stock Ownership On A Permanent Decline?


The latest from AAII (via The Pragmatic Capitalist):

Individual investors allocated 51.7% of their portfolios to stocks and stock funds last month, a 1.2 percentage point drop from June. The historical average is 60%.

Equity allocations have been below the historical average for most of 2010 and the July results show that this trend is continuing. Market volatility and economic uncertainty are causing individual investors to stay defensive. Many are focused on income generation, either through dividend-paying stocks or bonds.

On the one hand, this could be seen as bullish — reversion to the mean at all.

On the other hand, it’s interesting that you look at the chart above, it looks like declining stock ownership and increasing bond ownership are both on gradual decade-long trends.

If you assume that demographics are going to determine investing patterns, as Argonaut’s David Gerstenhaber does, then this could go on for quite some time, as ageing boomers continue to swap equities for bonds.