After 6 years of being scared out of risk, in the wake of violent capital losses in 2007-09, over the past 2 years individual investors have been gradually seduced back to equities like June bugs to a bug zapper just as risk-reward probabilities have rarely been worse in human history. As shown below, households, otherwise known as the tragic “retail” investors, are now holding the lowest fixed income and highest equity allocations since the prior stock market peaks of 2000 and 2007. The Fed QE sales pitch has finally accomplished its mission: banks bailed out, households duped into holding the bag once more.
Meanwhile, a recent survey by Koski Research found that 77% of investors over 50 who had more than 250K of savings said that their primary objective was to not lose their principle. Holding 60% of one’s savings in egregiously over-valued stocks is very likely to deliver the opposite of this stated goal.