November AAII Asset Allocation Survey: Equity Exposure Pulls Back

Summary

• Stocks and Stock Funds: 63.2%, down 2.6 percentage points.
• Bonds and Bond Funds: 18.3%, up 1.5 percentage points.
• Cash: 18.4%, down 0.9 percentage points.

Individual investors’ exposure to equities hit a four-month low in November according to the latest AAII Asset Allocation Survey. Allocations to cash and fixed income both increased.

Stock and stock fund allocations decreased by 2.6 percentage points to 63.2%. Equity allocations were last lower in July 2020 (62.2%). This marks the sixth consecutive month and the eighth month since the start of 2020 that stock and stock fund allocations are above their historical average of 61%.

Bond and bond fund allocations increased by 1.5 percentage points to 18.3%. This is the 21st consecutive month and the 22nd month since the start of 2019 that fixed-income exposure is above its historical average of 16.0%.

Cash allocations rose 0.9 percentage points to 18.4%. The last time cash allocations were at their historical average of 23.0% was in April 2020.

Optimism about the short-term direction of the stock market, as measured by our weekly Sentiment Survey, was significantly higher in November as positive news about vaccines was released. This did not translate to higher equity exposure as many of our members take a long-term approach to portfolio allocation.

Though exposure to stocks and stock funds was lower in November, it was similar to what we’ve seen over the past several months. Since June, equity exposure has fluctuated between 62.2% and 65.8%.

Last month’s special question asked AAII members how the prevailing economic data is affecting their asset allocation decisions.

Almost half of all respondents (49%) say that the data is not affecting their asset allocation decisions. Reasons given as to why include a long-term investing approach, being well diversified and strictly following specific investment plans. This compares to 27% of respondents who say that their asset allocation decisions are minimally affected by the prevailing economic data. AAII members in this group say that economic data may only lead to small percentage shifts from equities to either cash or bonds.

About 17% of respondents say that the prevailing economic data is heavily affecting their asset allocation decisions. Many of these individuals have sold their positions and are now heavily allocated in cash, mainly due to uncertainties with both the presidential election and the coronavirus pandemic.

Here is a sampling of the responses:

• “I have a large portfolio, over 150 stocks. Ninety-five percent of that portfolio does not change. I only use 5% as my trading stocks. My trades are influenced by my perceptions of how the coronavirus battle is going.”
• “I have a tendency to be close to all in or all out. I am concerned about the Senate. Also, the probable new president.”
• “I’m holding a good bit of cash as a hedge against uncertainty in the market. Dividend-paying stocks and bond funds remain constant for income.”
• “No effect. I set long-term allocation strategies and have stuck to them.”
• “Very much; when the data gets worrisome, it is time to sell much of the high beta stocks, cut back on all growth stocks and probably buy some put options, too.”

November AAII Asset Allocation results:

• Stocks and Stock Funds: 63.2%, down 2.6 percentage points
• Bonds and Bond Funds: 18.3%, up 1.5 percentage points
• Cash: 18.4%, down 0.9 percentage points

November AAII Asset Allocation details:

• Stocks: 27.9%, down 2.8% percentage points
• Stocks Funds: 35.4%, up 0.2% percentage points
• Bonds: 3.0%, up 0.1 percentage points
• Bond Funds: 15.3%, up 1.5 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: https://www.aaii.com/investor-surveys.

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