Bloomberg News

Stock Allocations Reach 18-Month High in U.S., AAII Says

February 04, 2013

Individuals last month allocated the largest proportion of investments to stocks since July 2011 as equities rallied after lawmakers reached a budget compromise, the American Association of Individual Investors said.

Respondents devoted 61.4 percent of their investments to equities in January, compared with an average of 60 percent, the report showed. While allotments for fixed income declined to 20 percent over the same period, individuals have historically held even less -- about 16 percent -- of their investments in bonds. Cash portions also dropped, falling 2.2 percentage points to 18.4 percent, well below their average of 24 percent.

The Standard & Poor’s 500 (SPX) Index capped its best January since 1997, returning 5.2 percent including dividends, as companies reported better-than-estimated earnings and lawmakers reached a compromise to avoid most of the so-called fiscal cliff of more than $600 billion in spending cuts and tax increases. Bullishness reached a two-year high, a separate survey from the AAII showed on Jan. 24.

“January was a strong month for the stock market,” AAII Vice President Charles Rotblut wrote in the report. “Optimism among individual investors about the short-term direction of stock prices has improved. Clarity about the tax rates, the avoidance of the fiscal cliff and continued economic growth also helped.”

Individuals added $3.1 billion to U.S. stock mutual funds in the first week of this year, the most since at least 2000, after withdrawing almost $250 billion in the past four years, according to data from research firm EPFR Global, scarred by the 2008 financial crisis that wiped out $11 trillion in market value.

Investors have piled into less volatile securities during the past six years, adding more than $1.1 trillion to bond funds, based on data from the Washington-based Investment Company Institute. About $150 billion was withdrawn from mutual funds that invest in American stocks in 2012.

To contact the reporter on this story: Leslie Picker in New York at lpicker2@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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