Tags: MarketWatch | Americans | 2013 | Stocks

MarketWatch: Most Americans Sat Out 2013's Stock Party

By    |   Sunday, 15 December 2013 12:25 PM

The U.S. stock market decided to throw a party in 2013, but not that many average Americans showed up for the fun, according to MarketWatch columnist Howard Gold.

In a piece entitled, “Is the stock market still a playground for the rich?” Gold answered his own question: Yes, for the most part.

He noted pundits have taken hold of the notion that Main Street investors are diving into stocks just as the froth hits high tide and a dreaded bubble takes shape.

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

“The only problem is there’s little evidence John and Jane Public are barreling back into stocks. In fact, the data show overwhelmingly that the public remains wary of, if not hostile to, stock investing, and only a small number of affluent, adventurous individuals are doing the buying.”

Gold said research data show that of the $144.6 billion that flowed into domestic equity funds from U.S. investors in 2013, only $24.4 billion went into U.S. mutual funds. The rest  went into ETFs, which are primarily held by financial institutions rather than individual investors.

Only 3 percent of U.S. households owned ETFs in 2012, and those households had a median of $500,000 in financial assets, according to the Investment Company Institute.

Between 2008 and 2012, average individual investors put considerably more money into bond funds than into equity assets, Gold said.

“Seen in that light, this year’s modest inflows to domestic equity mutual funds are the equivalent of putting a toe in the water…,” Gold wrote.

He cited a recent report from TrimTabs estimating that savings deposits amounted to $416 billion in the first 10 months of 2013 – far more than the inflow into equity mutual funds or ETFs.

Reuters reported investors yanked $6.51 billion out of U.S. stock mutual funds in the week ended December 11 – the biggest weekly outflow of 2013 – on fears the Federal Reserve could start trimming its massive asset purchase as early as this week.

"There was some reason for caution," said Jeff Tjornehoj, head of Americas research at
Reuters’s Lipper data unit. "No one wants to be left at the top of the market."

The Fed's $85 billion in monthly debt asset purchases have kept a lid on interest rates, forcing  some investors to seek higher income in riskier assets such as stocks, Reuters noted. But if the Fed tapers those purchases, investors potentially could have less motivation to buy stocks.

Deutsche Bank, for one, believes more cash will flow into stocks in coming months, despite taper fears. The bank predicts up to $169 billion in pent-up cash and short interest will flow into equities within the next three to four months, CNBC reported.

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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The U.S. stock market decided to throw a party in 2013, but not that many average Americans showed up for the fun, according to MarketWatch columnist Howard Gold.
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2013-25-15
Sunday, 15 December 2013 12:25 PM
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