Low cash, high stock exposure: Retail investors stay committed - AAII

Retail investors grew a little less enthusiastic about stocks and a bit more interested in bonds in July, at least based on how they allocated their portfolios.

That's noteworthy because the latest American Association of Individual Investors (AAII) sentiment survey, released in early August, pointed to a more optimistic outlook. Bullish sentiment ticked higher, while neutral and bearish views both edged lower.

But sentiment and positioning don't always tell the same story. The AAII's monthly asset-allocation data, which tracks where investors are putting their money, suggests retail investors made a modest defensive shift last month.

Stock and stock fund allocations slipped to 70.4% from 71.0% in June. Bond and bond fund exposure rose to 15.4% from 14.4%, while cash allocations eased to roughly 14.2% from 14.6%.

Even though investors reduced stock exposure, cash allocations declined proportionally even more. As a result, the stock-to-cash ratio rose to 4.96 in July from 4.87 in June, reaching its highest level since November 2021, when it stood at 5.02.

The decline in equity exposure stands out because June's 71.0% reading was only marginally below November 2025's 71.2% allocation, the highest level since November 2021. Notably, that earlier peak coincided with major U.S. indexes approaching the highs that preceded the 2022 bear market.

At the same time, bond allocations climbed to their highest level since April, while cash allocations fell to their lowest level since August 2021.

None of these measures should be viewed as precise market-timing indicators. Still, history suggests they're worth watching. Over the past decade, peaks in the stock-to-cash ratio have often preceded periods of market turbulence. In many cases, divergences emerged before more significant pullbacks took hold.