Schwab: "New Accounts Are At Levels We Have Not Seen Since The Dot Com Bubble" As Millennials Rush Into Stocks

We can now officially close the book on the "cash on the sidelines."

One week ago, we reported that in the latest weekly survey of Bank of America high net worth clients, the cash allocation had fallen to an all time low of just 10.4%, below the previous record low of 11% in April 2007 as everyone is "forced" to "dance" in this market, to quote Chuck Prince, in which the music is still playing.

Now, in a separate confirmation of what Deutsche Bank recently described as market "froth", Jonathan Tepper points out that the stock euphoria has finally spread to the retail investor.

Case in point: in its Q2 earnings results, Schwab reported that after years of avoiding equities, Schwab clients opened the highest number of brokerage accounts in the first half of 2017 since 2000.

This is what Schwab said on its Q2 conference call:

New accounts are at levels we have not seen since the Internet boom of the late 1990s, up 34% over the first half of last year. But maybe more important for the long-term growth of the organization is not so much new accounts, but new-to-firm households, and our new-to-firm retail households were up 50% over that same period from 2016.

In total, Schwab clients opened over 350,000 new brokerage accounts during the quarter, with the year-to-date total reaching 719,000, marking the biggest first-half increase in 17 years. Total client assets rose 16% to $3.04 trillion.

Schwab also adds that just like in the case of Bank of America's HNW private clients, the net cash level among its clients has only been lower once since the depths of the financial crisis in Q1 2009:

Now, it's clear that clients are highly engaged in the markets, we have cash being aggressively invested into the equity market, as the market has climbed. By the end of the second quarter, cash levels for our clients had fallen to about 11.5% of assets overall, now, that's a level that we've only seen one time since the market began its recovery in the spring of 2009.

While some of this newfound euphoria may be due to Schwab's recent aggressive cost-cutting strategy, it is safe to say that the wholesale influx of new clients, coupled with the euphoria-like allocation of cash into stocks, means that between ETFs and other passive forms of investing, as well as on a discretionary basis, US retail investorshas never been more "all-in" stocks than they are now.

But wait, there's more: throwing in the towel on prudence, according to a quarterly investment survey from E*Trade, nearly a third of millennial investors are planning to move out of cash and into new positions over the coming six months. By comparison, only 19% of Generation X investors (aged 35-54) are planning such a change to their portfolio, while 9% of investors above the age of 55 are planning to buy in.

Furthermore, according to a June survey from Legg Mason, nearly 80% of millennial investors plan to take on more risk this year, with 66% of them expressing an interest in equities. About 45% plan to take on “much more risk” in their portfolios.

In other words, little by little, everyone is going "all in."

Ironically, Schwab's own economists were forced to caution its clients that the party may soon be ending as we discussed last week in "Even Schwab Is Warning Retail Clients Of 'Danger Signs Rising':"

A solid earnings season should contribute to a continuation of the bull market in stocks. Dangers are lurking, however, and the possibility of a decent-sized pullback has grown over the past couple of months, in light of monetary policy and geopolitical uncertainties. While we would likely view such a move as healthy, it can be disconcerting. Stay diversified and be prepared to guard against overreacting to any such move.

Because if there is anything retail investors are known for, it is avoiding "overreacting" to "decent-sized pullbacks." As for those 45% of Millennials planning to take on "much more risk" at the all time highs in the S&P, good luck.


evoila Mon, 07/31/2017 - 16:58 Permalink

.... these MFers are diluting the "cash on the sidelines" with inflation everyday, and understating the inflation by orders of magnitude. Hard to sit by and be patient when a sandwich and a drink costs $14.

GUS100CORRINA evoila Mon, 07/31/2017 - 17:12 Permalink

Schwab: "New Accounts Are At Levels We Have Not Seen Since The Dot Com Bubble" As Millennials Rush Into StocksMy response: The Millennials must have looked at the SVXY chart and said: "HEY MOM, LOOK AT THIS CHART. SEE HOW EASY IT IS TO MAKE MONEY, EXPECIALLY WITH THE JANET YELLEN COVERED CALL." THE CENTRAL BANKS ARE NEVER, EVER GOING TO LET THE MARKETS FALL. With $15 dollars invested in SVXY in Jan'16, you would have $90 today ... 600% without even breaking a sweat. SO HOW MUCH MONEY CAN YOU AND DAD LEND ME?? MOM ... I'LL GET YOUR MONEY BACK TO YOU ONCE I MAKE MY 1ST MILLION.THE END ...

In reply to by evoila

Al Huxley Jim Sampson (not verified) Mon, 07/31/2017 - 17:41 Permalink

Yeah, because if being raped 'investing' in the filthy miners isn't a fast enough way to get fleeced by the shitheads who control that tiny, filthy market, then you can do it 3x faster betting in the ultra-rigged 3x funds where even if you're right on the direction they'll kill you on intraday swings and decay.  Why don't you just mail those shitheads your money and get it over with?

In reply to by Jim Sampson (not verified)

RagaMuffin Mon, 07/31/2017 - 17:00 Permalink

Did Schwab indicate how many of the "new" accounts were Optionsxpress accounts "converted" to Schwab? If not, you now know how Schwab rolls...................

adr Mon, 07/31/2017 - 17:01 Permalink

What millennial investors?The two of them that have enough money to invest are putting more in the stock market. I only know one person under the age of 30 that has a stock portfolio that isn't just a 401k and he only has $20k in it.I guess if enough millennials put $10 a month into a 401k it can add up to something. How can a generation that has less than $500 average in a checking account be stock market investors?The only cash on the sidelines is the printed trillions that haven't been transferred yet from the Federal Reserve to the banks that own it.

Clock Crasher adr Mon, 07/31/2017 - 17:19 Permalink

Millennial Twitch live stream gaming and Millennial Youtube stars might have money to invest.Then there might be Millennials making big money in the universities as faculty staff and others making big money in big pharma and obamacare as paper pushers.I am wildly speculating by the way.

In reply to by adr

Icewater Enema Mon, 07/31/2017 - 17:06 Permalink

Ah, I see. So millenials are the muppets this time around. Well, someone has to buy what I'm selling as I bail out. The problem is some Bernie-like character will promise to pay back their losses and he or she will get elected next time.

itstippy Mon, 07/31/2017 - 17:16 Permalink

The Millenials are smart.  They have figured out that the corporations will own everything in their lifetime.  They figure they might as well own a small piece of the corporations; get in on the Stock Market action.They haven't figured out that they are the patsies and will be stripped to the bone by the financial piranhas.  They'll learn that in time.

rp2016 Mon, 07/31/2017 - 17:19 Permalink

   This seems to be the plan; 1. Bring the herd to few financial instrument;2. If things don't work out for FED, then collapse it3. Channel all the ill-wealth into a deflationary currency...Brilliant Evil .. simply brilliant.… ZH, you need to disclose what you are planning to do? This Plan B will test even the most honest. Honesty is going to be put it its limits.