Retail investors keep leaning into stocks

Retail investors grew a bit more comfortable with stocks last month and slightly less enamored with bonds, according to the latest American Association of Individual Investors (AAII) asset allocation survey.

Stock and stock fund allocations edged up to 71.1% in August from 70.4% in July. Exposure to bonds and bond funds slipped to 14.6% from 15.4%, while cash holdings were essentially unchanged at 14.3%.

The increase in equity exposure may seem modest, but it comes with an interesting backdrop. August's 71.1% stock allocation was just a shade below November 2025's 71.2% reading, which marked the highest level since November 2021, when investors allocated 71.4% of their portfolios to stocks.

That late-2021 peak is notable because it coincided with the S&P 500 .SPX nearing highs that preceded the 2022 bear market.

Another metric tells a similar story. The stock-to-cash ratio edged up to 4.97 in August from 4.96 in July, reaching its highest level since November 2021, when it stood at 5.02.

To be clear, none of these measures are reliable market-timing tools. Still, history suggests they are worth watching. Over the past decade, peaks in the stock-to-cash ratio have often coincided with periods when markets became more vulnerable to turbulence. In several cases, warning signs emerged before more meaningful pullbacks took hold.

The latest survey suggests individual investors continue to favor stocks over bonds and have little appetite for building cash positions. Cash allocations remain near historically low levels, while equity exposure remains elevated heading into September, traditionally one of the toughest months for U.S. stocks on average.

What's more, retail investors appear to be growing more optimistic. The latest weekly AAII sentiment survey, released last Thursday, showed the closely watched bull-bear spread turning positive for the first time in more than a month, a sign that bullish sentiment is once again gaining the upper hand.