The State of the U.S. Financial Markets as of Midyear 2023

Barry from TX posted over 3 years ago:

Charles, after I read these monthly updates, I always feel you strive to leave your opinions at the door—on purpose -- to create room for each of us to draw our conclusions about what the data are saying to us. I respect that. That is Reason #1 I am an independent investor. My future is my responsibility. Paying someone to manage my money seems equivalent to paying someone to vote for me. So, what does a “mash-up” of these market, sentiment, and allocation data say to AAIIers? #1 Cap-weighted indexes are warped abnormally higher by the dominance of 10 or so large caps. People are riding the roller coaster to the end of the ride, which is always DOWN. #2 The AAII Sentiment Survey has shifted UP about 10% to 46% Bullish. "Sentiment" is usually considered a forward-looking indicator. Are 10% of AAIIers riding roller coasters at Coney Island this summer? #3 “Individual investors’ equity allocation is [UP] at a 13-month high last month,” over the period roughly paralleling the rise in the Fed rate increase cycle since March 2023 where interest rates have increased UP from 0% to 5%. #4 Bond allocations are DOWN about 10% to 14.1% which is a 28 MOM trend 10% BELOW the historic average at 16.0% ... despite the 5% rise [UP] in bond yields and interest rates since March 2023. #5 At this point, UP 5% higher interest rates offset inflation UP 4% producing a risk-free basis at 4%. #6 AAII portfolio asset allocations mirror this skew and are largely unchanged over more than 16 months of Fed intervention – 66% equities, 14% fixed income, and 20% cash approximating the historical 60/40 model. #7 Given this dashboard view of traffic (markets), speed (AAII sentiment), and gas (AAII allocations) of our version of “The Abilene Paradox,” I have to ask, Is the Pogo Factor operating here? Have we met the enemy? Is it us?

Eric from Michigan posted over 3 years ago:

Enjoyed this article.Your takeaways mentioned online banking. A research of the AAII website didn’t show any recent articles on the subject. Can you please direct me to any? It would be helpful to know of any other websites with such coverage. Thanks

Barry from TX posted over 3 years ago:

Eric, I hope my experiences provides some data until AAII publishes an update to their earlier articles on online accounts. I did my own research. My motivation was to be knowledgeable about these services before I recommended them to my college-age granddaughters. I opened accounts with 5 online banks and investment firms in 2021. I invested about $1,000 at each site in a savings account and brokerage account. There is a clear variation in the quality of services across firms. #1 website design is generally easy to navigate with simple, clear organized layouts. #2 They all do all their customer communications online (what else). Most force you to "chat" with someone who may or may not be a person and who may or may not be fluent in English. Some are very good at it. The big issue with “chatting” is that they are designed for trivial, routine matters. It is easy to ask questions beyond the expertise of the chatter. They do get back to you, but it may be a day later. #3 Experience with investment accounts was disappointing. I guess I expected too much. I invested $500 in "house brand" ETFs designed for "beginning investors" figuring they would try harder to please this group since it offers the potential to create long-term customers. Results to date are no better than large brokerages by enough to matter. #4 ALL actively tout "high yield" APRs on their savings accounts. Although many offer greater than 4% APR, I am earning almost 4.9% in money-market accounts at my regular brokerages ... and these funds are more liquid. I can get my cash out at the end of the day like a mutual fund. That is important with a credit crisis brewing in the background (mortgages, real estate, and small business/household loans like the runup to 2008). #5 All in all, online investing/banking comes up short of its promises. Their stock performance show this. #6 I still maintain all these accounts. They are supplementary sources for stock market data. I guess the desire NOT to have a more personal relationship with real people who have control over your cash is a generational bias with me.