“Things in the U.S. aren’t nearly as bad now as they were back in 2008 and early 2009, but don’t try and tell the retail investor that. They’re truly spooked.”
-Justin Walters, co-founder of Bespoke Investment Group.
Here we are 12 years into a secular bear market, and the concern amongst investors is capital preservation and risk management. Indeed, as the nearby cover of this weeks Barron’s is an article about the fear amongst investors (click for larger version). It may be the single most Bullish thing I’ve seen this year.
I find some of this hilarious:
• A recent survey conducted by Investment News found just 43.6% of financial advisors planned to increase their clients’ allocation to stocks this year, down from 63.4% at the start of 2011;
• A survey by the Yale School of Management showed a marked decline among investors who felt confident there wouldn’t be a stock-market crash over the next six months. The outlook was especially grim among individual investors, who seemed as worried about a crash as at the height of the financial crisis.
• Notwithstanding the downgrade of U.S. debt, investors bent on capital preservation are buying enough Treasuries to drive the benchmark yield on 10-year notes to below 2%.
• Of more than 300 new exchange-traded funds launched in 2011, the two most popular by far were conservative strategies that steered investors toward stability and capital preservation.
• Risk aversion is particularly acute among “Generation Y” investors born after 1980, who have decades to go before they retire but are especially reluctant to invest.
These data points show the depth of risk aversion amongst the investor class.
Just Don’t Lose It!
Barron’s, January 28, 2012