1. The market is breaking records, but investor money—particularly retail—remains largely sidelined.
The U.S. stock market has been rallying for the better part of five years now, but retail investors remain noncommittal. Typically, when the market hits milestones such as this latest one, you’d see investors jumping in, but that’s not happening here, Howard Silverblatt, senior index analyst for S&P Dow Jones, told ETF.com.
“This is more of a psychological move,” he said. “August is usually a light month for trading, but this year, August has been even slower than most years, with volume 4 to 5 percent less than normal.”
Right now there’s still a lot of cash sidelined, and a lot of it parked in fixed-incomelike equities such as preferred securities and dividend stocks where returns are limited, but not in the broad stock market.
On the other side, institutional money has been rather stagnant, unwilling to move out of the market despite massive gains that could, by now, have triggered some profit-taking, Silverblatt noted. Even the latest round of widespread geopolitical unrest didn’t cause institutions to seriously reallocate assets, he says.
It’s as though institutions are more afraid of being out of the market than in the market at this point, even as many call for a significant correction in the near term.
“No one has an exit plan,” Silverblatt said. “VIX is like it’s on drugs.” He notes that the VIX index, also known as the fear gauge, has been around 11, 12—far below the average of 21.09.
“We only have half the anxiety that we’ve had over the last 50 years,” added Silverblatt. “Last month, when the world was falling apart, it went up to 17—not even the average. The market is reacting well, the fundamentals of the market are good, but sales are not, spending is not and confidence is not.”