Household ownership of the U.S. stock market is near a record, but that could be a worrisome development, according to Ned Davis Research. Individual investors are the largest owner of stocks, having allocated roughly 48% of their assets to equities in the first quarter, analyst London Stockton said in a note. The comeback rally of the past two months could be attributed in part to a strong retail presence in the stock market. However, the current level of households buying in at a time when the S & P 500 is near its record high should concern investors, even if the most immediate trend remains bullish. “In the near term, short-term sentiment had gotten extremely oversold in April and the trend is bullish with many of our models and indicators either bullish or neutral at worst,” Stockton wrote. “But along with high valuations, high investor allocation to stocks doesn’t leave much room for future buying,” Stockton said. “Any change in investor preference could also send the market lower.” .SPX YTD mountain S & P 500, year to date That’s not the only corner of the market with the potential for selling pressure. Apollo chief economist Torsten Slok noted that record-high foreign ownership of the U.S. equity market, of 18%, could fall in the near future if the trade deficit is eliminated. “Foreigners selling goods to the US receive dollars in return, which are then used to purchase US assets, including US equities,” Slok wrote. “If the trade deficit is eliminated, there will be fewer dollars for foreigners to recycle into the S & P 500.” On Wednesday, all three major averages were higher ahead of the Federal Reserve’s interest rate decision, even as investors continue to wade through trade uncertainty and the rising conflict between Israel and Iran.
