JPMorgan Says U.S. Households Are No Longer Overweight Equities

In a flows and liquidity report issued Friday, Global Asset Allocation analysts at JPMorgan shared a look into the equity position of U.S. retail investors.

Since the beginning of 2016, U.S. retail investors were big sellers of equity funds. This made it the worst start to a year for equity fund flows since the beginning of 2008.

To assess the equity position of retail investors in the US, JPMorgan analysts examine two different metrics:

• “The share of equity funds in total open ended fund universe.”
• “The equity allocation of households as reported by US Flow of Funds.”

Their most recent look at these metrics revealed that retail investors in the US are no longer overweight equities. Consequently, “their equity exposure should not represent a big impediment for equity markets going forward."

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The note continued to explain that, opposite to perceptions, the level of medium term macro volatility is quite low, in relation to what has been seen in previous years. This, coupled with the low interest rates environment, “justifies a low equity discount rate making equities look attractive currently from a valuation point of view.”

Finally, the analysts noted, equity Long/Short hedge funds and Macro Discretionary hedge funds went on to increase their equity longs, while CTAs were starting to cover their equity shorts.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.