June AAII Asset Allocation Survey: Fixed-Income Allocations Rebound to a Four-Month High

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Individual investors’ fixed-income allocations rose to a four-month high last month, according to the June AAII Asset Allocation Survey. Equity allocations rose, as well, while cash allocations pulled back.

Stock and stock fund allocations rebounded by 1.7 percentage points to 67 percent. This is the 15th consecutive month and the 17th out of the past 18 months with equity allocations above their historical average of 60 percent.

Bond and bond fund allocations rose 0.5 percentage points to 16 percent, the largest allocation since February. The increase puts fixed-income allocations at their historical average of 16 percent.

Cash allocations fell 2.1 percentage points to 17.1 percent. The decline follows May’s eight-month high for cash allocations. June’s decline puts cash allocations below their historical average of 24 percent for the 31st consecutive month.

Both equity and bond allocations have been fairly stable during the first six months of the year. Since January, stock and stock fund allocations have fluctuated within a 1.9-percentage-point range, while bond and bond fund allocations have fluctuated within a 1.5-percentage-point range. The lack of a big change in allocations is not surprising, given the trend we’ve been seeing in the AAII Sentiment Survey and the decline in bond yields.

Neutral sentiment toward the direction of stock prices has been above its historical average of 30.5 percent for 25 consecutive weeks. Yields on the 10-year Treasury note have been trending downward throughout the year and ended June near a 12-month low. While individual investors are neither signaling optimism nor pessimism about the six-month direction of stock prices, prevailing low yields are not making bonds and cash attractive alternatives.

This month’s special question asked AAII members what they are doing to get portfolio income. More than half (53 percent) said they are holding dividend-paying stocks. Nearly a quarter (23 percent) said they are using bonds or bond funds for income purposes. Several of these respondents said they are using bond ladders. Approximately 7 percent realize income from REITs, and a nearly even number are using master limited partnerships (MLPs).

A sizeable portion (13 percent) of respondents said they are not doing anything. Many of these members are either still employed or receive pension income.

June asset allocation survey results:

  • Stocks and stock funds: 67 percent, up 1.7 percentage points
  • Bonds and bond funds: 16 percent, up 0.5 percentage points
  • Cash: 17.1 percent, down 2.1 percentage points

June asset allocation survey details:

  • Stock funds: 32.4 percent, up 2.2 percentage points
  • Stocks: 34.6 percent, down 0.5 percentage points
  • Bond funds: 12.8 percent, up 1 percentage points
  • Bonds: 3.2 percent, down 0.5 percentage points

Historical averages:

  • Stocks/stock funds: 60 percent
  • Bonds/bond funds: 16 percent
  • Cash: 24 percent

Charles Rotblut is the author of the new book Better Good than Lucky: How Savvy Investors Create Fortune with the Risk-Reward Ratio. The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online here.

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