Private investors desert the market, a good contrarian sign?

Capita Registrars reported yesterday that private investors in the UK dumped £1 billion of shares between March and May this year, the largest amount of net selling in five years and bigger than the summer of crisis hit in 2008.  Even worse for the investment industry this happened at a time when buying tends to go up as investors pile money into their annual tax free ISA allowance.

Charles Cryer, chief executive of Capita Registrars, says at the beginning of the year, investors were optimistic that the economy had turned a corner. ‘This encouraged private shareholders very cautiously to add to their holdings,’ he says. 

‘It seems their caution was justified as the market rally faded, and the economy sank back into recession. The eurozone crisis has now reached another critical phase and hopes for the global economy have been dampened. Private investors have reacted by selling shares in large volumes,’ he says.

On the plus side, dividends have been up, 22% in the first quarter of the year compared to 2011, Vodafone being one of the big payers.

So, optimism seems to be fading on the back of more doom and gloom coming out of Europe and a mix of not so good economic figures worldwide.  In the meantime markets just might have priced this in for now as the short term moving averages in my previous post show more bullish tendencies.  The market is expecting more reflationary measures to be taken in the US, UK and Europe.  It may not happen quickly, but it will probably happen and when it does the market will like it.

Sources

http://www.moneyobserver.com

http://www.ftadviser.com/2012/07/02/investments