As a brief addendum, here are several incremental sentiment surveys that show the dichotomy between the average retail investor in the US and their investment advisors:
A recent survey of Ameritrade clients shows that they are becoming optimistic about the US economy but are still staying away from the stock market. A surprising 50% answered either “very optimistic” or “somewhat optimistic” about the economic outlook. That is an increase of 17% percentage points from six months ago. The vast majority, 78%, are expecting the US economy to recover within one year.
That lukewarm optimism is not translating well when it comes to actually investing or trading more. Only 27% of those polled said that they plan to trade more. The majority 50% said they will make no changes and 23% said they will be reducing their trading activity.
And only 36% of Ameritrade clients feel that now is a good time to invest in the stock market. This is low but slightly (8% points) higher than six months ago.
And when asked regarding money flow into the stock market, only 32% said they had put money into the market over the past month. This is slightly (7%) lower than one year ago. Meanwhile 23% had reduced the long exposure of their portfolio by selling some or all of their equity investments. Of those individuals, 40% had moved their assets into the least riskiest investment: money market funds. This trend of disinvestment has continued throughout the year.
Russell Quarterly Surveys
The Financial Professional Outlook and the Investment Manager Outlook from Russell provide further insight into the retail investor’s mindset and more interestingly the disparity between advisors and investors.
The majority investment professionals surveyed were optimistic: 59% said they were “optimistic about the future of capital markets”. But only 7% their clients share that optimism.
When asked to cite specifically what concerns their clients have, advisors said the number one concern from their clients is economic uncertainty followed by stock market volatility. The third was the mistrust and cynicism directed towards Wall Street with investors believing that the ‘game is rigged’.
Continuing in that vein, according to the Russell Investment Manager Outlook survey, 88% of managers expect markets to continue trending higher in 2011 – 48% expect the market to gain less than 10% next year while 40% expect the market to gain 10% or more.
The vast majority of managers (90%) polled believe the market is either undervalued or fairly valued. And only 10% think it is overvalued. This compares to 93% and 7%, respectively, last quarter.
Managers are favoring the technology sector with 80% bullish expectations. Next is the energy sector with 68%. This is the second time that we’ve seen the energy sector appearing in the top list of favored sectors (the recent Bank of America Merrill Lynch survey). And don’t forget, retail investors are also jumping aboard the energy sector.
Managers seem to be accepting more risk as they shift their portfolios to include more consumer discretionary stocks and sectors in lieu of the more defensive posture they had held previously with consumer staples and utilities. US large caps are the favourite with 73% of managers bullish and only 12% bearish on the asset class. As well managers are continuing to be bullish on emerging markets with 71% expecting further gains.
Not surprisingly managers are extremely bearish on US treasury bonds with an overwhelming 83% bearish on the asset class. This is similar to the persistent bearish sentiment towards Treasury bonds we see in the quarterly Barron’s surveys. Only 5% of managers surveyed by Russell were bullish on government bonds, down from 9% last quarter. Corporate bonds are also unloved with 53% of managers bearish and only 24% bullish.
Finally, bullishness for real estate reached its highest level for this survey with 31% – up 10% points from last quarter. But it should also be noted that the majority (41%) remain bearish on real estate, down slightly from 48% last quarter.
It has been too long since we checked in with my ‘proprietary’ Sheeple Index. This is the measure of internet traffic directed to online trading websites. The intention is to gauge the interest of the average online retail trader and investor. After all, the more the clients of these cheap online brokers trade, the longer and more frequently they have to visit the website to do research, check their trades, enter orders, etc.
The traffic trend seems to be moribund and confirms the apathy that has gripped most US retail traders:
The only exception is E*Trade which is enjoying a surge in traffic. That might be a fluke based on a faulty algorithm from alexa or it might be that some clients are moving their portfolios over to E*Trade from other brokers or that E*Trade clients are really returning to the markets to trade more. Whatever the real answer, the overall picture is the most important. So for me at least, this reiterates what we already knew and have seen confirmed through many sources, the US retail investor has packed up their marbles and gone home.