Fixed-Income Allocations Rise To 3-Year High In July AAII Asset Allocation Survey

Includes: DIA, IVV, SPY, VOO, VTI
by: AAII


Fixed-income allocations rose to their highest level in three years, while equity holdings remained unchanged.

Cash holdings declined very slightly,.

Nearly 75% of those surveyed say that Brexit hasn't affected their allocation strategy.

Individual investors held their largest exposure to fixed-income investments in more than three years, according to the July AAII Asset Allocation Survey. Equity allocations were unchanged, while cash levels rose.

Stock and stock fund allocations stayed at 64.1% for a second month. July was the 40th consecutive month equity allocations were above their historical average of 60.5%.

Bond and bond fund allocations rebounded by 0.6 percentage points, to 18.0%. Fixed-income allocations were last higher in May 2013 (18.1%). The rise keeps bond and bond fund allocations above their historical average of 16.0% for the 12th consecutive month.

Cash allocations declined 0.6 percentage points, to 17.9%. June was the 56th consecutive month with cash allocations below their historical average of 23.5%.

There has been an overall increase in fixed-income exposure this year, particularly to bond funds. Relative to the range recorded for the current three-year period, six of the eight months with the highest fixed-income allocations were in 2016. This trend has occurred as optimism about the short-term direction of the stock market has remained below average for 38 consecutive weeks.

The ongoing investment environment remains tough for individual investors. Yields are low, while valuations for both stocks and bonds are elevated.

July's special question asked AAII members how Great Britain's decision to leave the European Union affected their allocation decisions. Nearly three-quarters of respondents (73%) said the referendum's outcome either did not affect their portfolio allocation decisions or that they are not making any changes in reaction to the vote. Some of these respondents viewed the vote as a short-term event, said they are waiting to see what happens in the future or explained that the vote doesn't change their long-term strategy. Slightly more than 10% of respondents said they either reduced, are holding off or are more cautious on international investments, with some specifically mentioning British companies.

Here is a sampling of the responses:

  • "Has not affected my allocation."
  • "Increased caution regarding international stock allocations."
  • "Not much; generally have maintained the same asset allocation."
  • "So far no effect. It will be some time before the terms for the withdrawal from the EU will be decided."
  • "I reduced foreign holdings and increased domestic stock holdings."

July Asset Allocation Survey results:

  • Stocks and Stock Funds: 64.1%, no change
  • Bonds and Bond Funds: 18.0%, up 0.6 percentage points
  • Cash: 17.9%, down 0.6 percentage points

July Asset Allocation Survey details:

  • Stocks: 29.3%, down 1.2 percentage points
  • Stock Funds: 34.9%, up 1.2 percentage points
  • Bonds: 3.3%, down 0.3 percentage points
  • Bond Funds: 14.7%, up 0.9 percentage points

Historical Averages:

  • Stocks/Stock Funds: 60.5%
  • Bonds/Bond Funds: 16.0%
  • Cash: 23.5%

*The numbers are rounded and may not add up to 100%.

The AAII Asset Allocation Survey has been conducted monthly since November 1987 and asks AAII members what percentage of their portfolios are allocated to stocks, stock funds, bonds, bond funds and cash.

Want to weigh in? Take the survey yourself and see results online here.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.