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Hey, good news America: Investors are bailing on stocks

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Americans are working, spending and generally in a good mood. But we do not appear happy with our longest-running bull market on record. Perhaps the old saying is true that when we feel burned, we behave ridiculously. 

That means the most unloved bull market in memory chugs along. Since March 1, 2009, the Standard & Poor's 500 stock index is up 435% while investors continue to reduce their exposure to stocks.

Despite 2019 turning in the strongest year for stock investors in the last six, investors have been selling stock mutual funds at a record pace. So far, equity mutual funds and exchange-traded funds have lost over $135 billion to withdrawals – the largest amount since Refinitiv Lipper began tracking the flows in 1992.

While the market has continued to power forward and investors have been exiting equity investments, cash on the sidelines has risen. So what exactly does that mean for investors? 

While it is difficult to say for certain, we can make some assumptions based on what we do know. 

First and foremost, when markets get frothy, one of the catalysts that drives stocks higher is cash moving from the sidelines into the stock market. Think FOMO on steroids. Yet, we have seen the opposite occur over the last few years. Indeed, as stock prices have risen, so has cash.

And it remains a fact that with bond yields at extraordinarily low levels, there are few investment options other than stocks to achieve yield and capital appreciation objectives for many investors. 

According to Strategas Research Partners’ Jason Trennert, one-half of the S&P 500’s total return since 1926 has come from dividends. And in the decade beginning in 2000, basically, the only return investors received came in the form of dividends, according to Trennert. Dividends matter.  

Real yields on bonds – the after-inflation return – is just modestly above zero. And, while we are on the subject of inflation, despite expectations that full employment would drive prices higher, inflation remains elusively tame. The Fed is unlikely to raise rates in such a benign environment.    

Additionally, stock buybacks are providing a floor to stock prices by reducing the supply of individual shares.  Trennert’s work has also shown that in 2018 “buybacks accounted for $573 billion of net new demand for equities.” Compare this with equity ETFs, which generated $210 billion in demand and stock mutual funds, which were responsible for $124 billion of net sales.    

Dividend growth is around 7.2% in recent years and payout ratios are near historic lows. This gives companies room to grow the dividends further. Importantly, dividends provide investors with information: Large companies pay and raise the dividend at a rate based on what they believe long-term sustainable earnings growth to be. The dividend is a commitment; buybacks are opportunistic. But when combined, the two produce what is called the shareholder yield. That number is currently 5.1% for the S&P 500 which is over 3 percentage points higher than the yield on the 10-year Treasury. 

If you have cash on the sidelines, companies who pay a dividend and grow the dividend are a good place to start. These are easy to find if you run a search on just about any financial website. You can also determine if the company is buying back stock by reading the most recent earnings press release on their website. 

The combination of above-market dividend yield (that is growing) and a promise to buy back shares can create an attractive investment opportunity. Being informed and diligent is a better investing strategy than no strategy at all. And it keeps us from “acting ridiculously” at just the wrong time.



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Again BA, yahoo finance. Let's see(???) should I follow the financial news reporting of yahoo for my retirement investments or my financial advisor, who is well known, communicates with me at least quarterly about the economy, their forecast and outlook, and so far this year increased my portfolio >25% to date, or yahoo finance. TOUGH decision and one I must ponder carefully!!!

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21 minutes ago, md11fr8dawg said:

Again BA, yahoo finance. Let's see(???) should I follow the financial news reporting of yahoo for my retirement investments or my financial advisor, who is well known, communicates with me at least quarterly about the economy, their forecast and outlook, and so far this year increased my portfolio >25% to date, or yahoo finance. TOUGH decision and one I must ponder carefully!!!


Not exactly Yahoo Finance..... Article written by the following.... Nancy Tengler is chief investment strategist at Tengler Wealth Management, ButcherJoseph Asset Management and the author of “The Women’s Guide to Successful Investing.”


I didn't think it was bad news, I think they were pointing out it might be time to rebalance, I'm sure your financial advisor talks about rebalancing. Surely you don't pick one stock and stay with it forever... I found it interesting while investors are sitting on more cash which means they aren't buying, the markets continue to rise. The markets are rising because companies are buying back their own stocks. What happens when they stop buying back and investors are sitting on their cash? Markets will drop and smart money will be waiting to buy back in low...

Institutional investors, 401Ks, Pensions, etc., who only look at quarterlies will be caught behind the curve. For example, you said your advisor checks in every quarter. What if on January 2nd the bottom falls out? How much of your 25% will you give back? I too have an advisor and we chat once a month. He is great because he does keep me from reacting to the news too quickly. But he is also good about listening to me and making changes if I ask. Again, I didn't think this was a doom and gloom article, only one to keep people aware of how the money is flowing.

Like they say "Follow the money" and big money has stop buying and is waiting for a re-entry point. Regardless of what some people want to believe, this bull market started in 2009, and is the longest bull market in history. It will turn sooner or later, that's how the markets work. 

Wash, Rinse, Repeat.




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Stocks are at all time highs.  Many people are up 10-20% for the year.  Taking a little profit is always a good thing.  I always say sell em when you can not because you have too.   It’s been a good year of trading for me.  Take out the freaking trade tweets and it would have been even better.  

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BA, I understand your response and respect your point of view. My guy also helps me cut thru the noise and uses sound logic, charts and past history to help me stay grounded and make better decisions. I know every stock and how many shares of each I own. Believe me, I'm not resting comfortably at this time. I may get cold feet before they recommend any action. I don't want to lose thousands of bucks to recession. It takes too long to get it back if ever. And of course, once you are retired, it hard to replace $$ that gets spent.

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