Equities Market Still Shaky But Improving

With large sums of cash moved to the sidelines, valuations attractive and selling exhausted, there is no where to go but up — even if its only for a period of weeks or months.

The chart above looks at how far above or below the 21-year average allocation of 60 % invested in stocks individual investors are presently. As seen above when stock allocations drop 15 % or greater below that 22-year mean, (red circles) which has occurred only 3 times in the last 22 years (1990, 2002 and late 2008/early2009) it has equated into significantly higher stock prices 3/6 months up to several years later.

Even given the extent of the current rally, investors remain 6% below their mean allocation to stocks, and significantly below fully invested levels of 10-15 % above the mean. Sideline liquidity remains strong, investors are still not fully invested, and dips have remained fairly contained.

Does this mean the investors out of the market are missing the bull market? Or will they catch the next bull market after the current bull market recedes/ collapses? ( Big Picture )

"Cautiously, Small Investors Edge Back Into Stocks" NY Times Like everything else what goes down must come up, I think?

Another element of comfort, market jitters are down dramatically!

One of the most remarkable characteristics of the '08/'09 market crash was the daily volatility that occurred. On December 8th, the average absolute daily change of the S&P 500 over the last 50 days reached a record 4.02%! With the entire US stock market gaining or losing 4% to 5% of its total value on a daily basis for two months, how did any of us stay sane?

Since peaking late last year, however, the average daily change for the market has cratered. As shown below, over the last 50 days, the average absolute daily change for the S&P 500 is now under 1% at 0.87%.

( Bespoke )