A little Excerpt from a Zack’s Investment Management Letter (slightly paraphrased):
Best January Rally in Over 30 Years – stocks recovered sharply in January, with the S&P 500 and the Dow Jones Industrial Average delivering the best start to a year since the 1980s… But a harsh reality exists for many investors: according to Lipper data, investors moved more than $190 billion into cash in Q4 2018, which marked the most significant move to cash since 2008. Investors also pulled a record $25 billion from U.S. stock ETFs last month. In short, while stocks have surged off the bottom in January, many investors were on the sidelines for the rally. This outcome serves as a stark reminder that selling in response to downside volatility often results on getting whipsawed when markets recover.
I couldn’t say it better myself!
Saul
53 Likes
Am I missing something here. If Investors sold stock in the fourth quarter and moved it into cash, someone else had to buy those shares, and that cash didn’t just come from thin air. If I sell a stock, someone else had to buy it. Just like when I buy a share, someone else had to sell it. Buying and selling stock is a net zero game, for every dollar in stock sold, a dollar in stock was bought.
3 Likes
The difference is which side of the trade you were on. Sure, if you sold, someone was buying, but from the perspective of the seller you sold at a low and presumably remained in cash and thus, missed the rally. The alternative was to ignore the downside, stay the course, and profit from the rally.
Those that bought in December have done well. Those that sold, maybe not so much. Those that stayed the course didn’t need to be right twice. My two cents.
-Steve
3 Likes
Am I missing something here.
Investors do go to cash. To do so they have to sell. That creates an unbalance in supply and demand and the remedy is to lower the price to bring in more buyers. The money in the bank by the seller is offset by a lower valuation of the whole market. That’s how it works.
Denny Schlesinger
4 Likes
And the CNN fear index hit an all time low of 2 on a scale from 1 to 100 on Dec. 24th signaling a bottom.
I was buying all along, from early November to the end of Dec., the most buying I’ve ever done.
It helped to be almost 60% cash most of 2018.
Of course I didn’t discover this board or Bert’s newsletter until mid 2018. If I had found this place earlier I wouldn’t have been in all that cash. 
Chris