The Trump rally is just the latest leg in a wild 8-year-old explosion higher, but mom-and-pop investors still aren't impressed.
By multiple measures, the retail-investing crowd has not been a significant player in the second-longest bull market on record.
Sentiment surveys show fewer than 1 in 3 believe stocks will be higher six months from now. Households were net sellers of stocks in 2016 and even exited stocks during the fourth quarter, when Donald Trump's upset presidential victory sent the market surging. And at least one market expert believes the trend of retail investors sitting things out is likely to continue through the year, despite its promising start.
"In 2017, we expect history will repeat itself," David Kostin, chief U.S. equity strategist at Goldman Sachs, said in a report for clients. "Corporations and (exchange-traded funds) will continue to drive equity demand while mutual funds, households, and pension funds will remain net sellers of equities."
Households are coming off a year in which they sold a net $39 billion in equities during a year that saw the S&P 500 rise nearly 10 percent (12 percent including dividends), according to data from the Federal Reserve compiled by Goldman.
Mutual funds, which Morningstar estimates to be 65 percent owned by retail investors, dumped a net $117 billion during the year, including $46 billion in a fourth quarter when the S&P 500 gained 3.3 percent. Foreign investors also sold U.S. stocks, ditching $60 billion worth after the election.
Kostin expects the tide to continue, with mutual funds forecast to sell a net $50 billion this year.
There are multiple possible explanations for the selling. Some retail investors may simply be raising cash, while the outflow from mutual funds comes amid a pronounced move from actively managed funds and into passively managed ETF products.
However, the bearish sentiment during the current rally is harder to figure.
The most recent survey from the American Association of Individual Investors puts the bulls at just 31.2 percent, well below the long-term average of 38.5 percent. Bearishness came down from 46.5 percent the week before to 38.7 percent, but remains above the average.
"There's a lot of concern that stocks have just run too far, too fast, without a break," said Charles Rotblut, vice president and editor of the AAII Journal.
Contrast that with the Investors Intelligence survey of market professionals that just two weeks ago had bullishness at a 30-year high, and the disparity becomes even clearer.