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September AAII Asset Allocation Survey: Four-Month High For Exposure To Equities

Summary

Stocks and stock funds: 69.9%, down 1.4 percentage points.

Bonds and bond funds: 14.2%, down 0.2 percentage points.

Cash: 16.0%, down 1.1 percentage points.

Individual investors’ exposure to equities reached a four-month high last month. The September AAII Asset Allocation Survey also shows declines in fixed-income and cash allocations.

Stock and stock fund allocations rose 1.4 percentage points to 69.9%. This is the highest level since May 2018 (70.0%). September was the 66th consecutive month with equity allocations above their historical average of 61.0%.

Bond and bond fund allocations were a very modest 0.2 percentage points lower at 14.2%. Fixed-income exposure was last lower in May 2018 (14.1%). Last month was also the 10th consecutive month with bond and bond fund allocations below their historical average of 16.0%.

Cash allocations declined 1.1% to 16.0%, nearly reversing August’s increase. Cash allocations remain below their historical average of 23.0% for the 82nd consecutive month.

A good month for stocks (particularly larger-capitalization stocks) combined with a rising yield for the 10-year Treasury note did little to sway individual investors’ allocations. So far, tariffs have not altered how the majority of individual investors are allocating their portfolio. At the same time, optimism about the stock market’s short-term direction mostly stayed below average during September in our weekly Sentiment Survey.

Last month’s allocation levels were within the range we’ve seen throughout the year, even though equity allocations did trend up from summer levels. There wasn’t much in terms of movement among the major financial market indicators to drive allocations in one direction or another in September. While optimism was mostly below average in our Sentiment Survey, pessimism was just slightly above its historical average.

Last month’s special question asked AAII members if trade policy has affected their allocations. More than three-fifths of all respondents (63%) say trade policy has not altered how they allocate their portfolios. Several of these respondents say they expect disputes to be resolved, while many others describe themselves as long-term investors. A smaller portion of these respondents explain that while trade tensions have not influenced their allocation decisions so far, they potentially could have an impact in the future. Almost 15% of all respondents say they have increased their cash allocations or otherwise have become more conservative because of trade policy. About 8% of all respondents have either sold or are postponing the purchase of foreign stocks.

Here is a sampling of the responses:

  • “Trade policy has not impacted my allocation. I am a long-term investor; it’s impossible to determine what actual changes, if any, will occur to trade policy.”
  • “Trade tensions have caused me to increase my cash position in anticipation of market volatility.”
  • “Has not; I do not react to short-term events. In the long term, these trade policies have a way of resolving themselves.”
  • “So far, trade policy has not influenced my investment strategy, but I am watching.”
  • “I’m staying away from international exchange-traded funds (OTC:ETFS).”

September AAII Asset Allocation Survey results:

  • Stocks and stock funds: 69.9%, down 1.4 percentage points
  • Bonds and bond funds: 14.2%, down 0.2 percentage points
  • Cash: 16.0%, down 1.1 percentage points

September Asset Allocation Survey details:

  • Stocks: 33.9%, up 3.0 percentage points
  • Stock funds: 36.0%, down 1.6 percentage points
  • Bonds: 2.7%, down 0.1 percentage points
  • Bond funds: 11.4%, down 0.1 percentage points

Historical Averages:

  • Stocks/Stock Funds: 61.0%
  • Bonds/Bond Funds: 16.0%
  • Cash: 23.0%

*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. The survey and its results are available online at: www.aaii.com/investor-surveys.

If you want to become an effective manager of your own assets, consider a risk-free 30-day Trial AAII Membership.

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