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INDIVIDUAL INVESTORS ADD RISK, TILT BACK TO EQUITIES IN MAY

Individual investors started warming back up to stocks in May, based on the latest data from the American Association of Individual Investors (AAII).

AAII’s weekly sentiment survey -- a closely watched gauge that’s often used as a contrarian signal -- showed pessimism easing in the most recent release.

Beyond sentiment, AAII also tracks how members are allocating their portfolios each month across stocks, bonds, and cash. That gives a more concrete look at what retail investors are actually doing with their money as market conditions change. Like sentiment, these shifts can also carry contrarian implications.

In May, the message was fairly clear: investors leaned back into equities and trimmed both cash and bond holdings.

• Stocks & stock funds: 69.8% (up from 68.5% in April)

• Bonds & bond funds: 15.0% (down from 15.6%)

• Cash: 15.3% (down from 15.9%)

Equity exposure is still below its recent peak -- 71.2% in November 2025. That was the highest reading since 71.4% in November 2021, which roughly coincided with major U.S. indexes topping out ahead of the 2022 bear market.

Meanwhile, with May’s shift, the stock-to-cash ratio climbed to 4.56 from 4.31 in April, as investors took on more risk, helped in part by hopes of easing tensions in the Middle East.

Still, even with the S&P 500 hitting fresh record highs in May, that ratio hasn’t surpassed February’s 4.89 peak. That could matter. If the ratio starts to roll over without breaking above that earlier high, it would mark a divergence.

And while these signals aren’t perfect timing tools, history shows that peaks in this ratio have often come ahead of periods of market turbulence -- with divergences sometimes emerging before sharper downturns.

(Terence Gabriel)

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