"The highest commitment to stocks since the record levels of early 2000"
By Elliott Wave International
We all love Mom and Pop and cherish the valuable lessons about life they've given us along the way.
Yet, when it comes to investing, Mom and Pop may need to learn some lessons of their own.
Keep in mind that the American Association of Individual Investors'
(AAII) weekly survey is said to be representative of "Mom and Pop"
investors, well-known for being quite cautious.
The August 2021 Elliott Wave Financial Forecast, a
publication which provides analysis of major U.S. financial markets,
discussed their behavior as the stock market was staging a significant
rally:
In July [2021], the five-month average
AAII stock allocation increased to 70.6%, a high level for this normally
skittish cohort of investors. ... This is the highest commitment to
stocks since the record levels of early 2000.
This sentiment indicator is not meant for precision market timing,
and, indeed, it seemed like these normally cautious investors had made
the right decision. The rally persisted for the remainder of 2021. But,
by early January 2022, the Dow Industrials and S&P 500 hit their
all-time highs and have traded lower since.
What does this have to do with today?
Here's an interesting chart and commentary from the August 2023 Elliott Wave Financial Forecast: