Certainly you would know when the stock market was crashing. Obviously, at least through today, it isn’t crashing. However, retail investors are certainly acting like it.
Trimtabs.com reported this week that investors sold 35 billion dollars worth of stocks and mutual funds in the month of April. That statistic by itself means very little until compare it to the last time it happened. You would have to go back to the heart of the financial crisis when the American Financial System was burning to see when investors sold that many billions of securities. The last time investors sold like this was October 2008.
September and October were the two biggest months of the crisis. Selling could be justified. However, today? This leads me to 3 conclusions.
1) Positive sign for the stock market – Investors as a group are notorious for doing the wrong thing at the wrong time. So, if everyone is selling, could this be a buying opportunity?
2) A change in character – Investors held onto their investments for the most part during the 2000-2002 and 2007-2009 bear markets. Ever investor is taught to buy and hold. Could we be seeing the anti-buy and hold movement starting to play out?
3) The stock market is definitely not in a bubble – There has been speculation that the stock market is in a bubble. Investors don’t behave this way in a bubble.
Whatever the reason, something doesn’t add up. This is just another statistic on a long list of things that don’t add up.