At the start of the month we discussed the idea that since nearly everyone was expecting a pull back in the short-term, the odds of one occurring were diminished. We also highlighted how the AAII poll of individual investors was showing a bearish reading of over 50%, which in prior periods marked good buying opportunities.
Since then we have been trying to figure out why individuals appear to be so negative. This morning we found one possible reason when E*Trade (ETFC) released its monthly performance metrics for April. These results show that either the gains retail investors are seeing have lagged the major averages or else E*Trade lost a lot of accounts during the month.
Of the twelve months since 2003 where the S&P 500 gained more than 2.5%, April marked only the third time total assets in E*Trade client accounts increased by less than the gain in the S&P 500 (3.5% vs. 4.3%). Since E*Trade does not disclose net new account balances (gross money coming in minus gross money going out), there is no way to definitively calculate how its clients did during the month. However, E*Trade does disclose how much gross new money they bring in, and after accounting for mergers in October and December of 2005, April looks like it was the highest total inflow of new money since at least 2003. So even if E*Trade lost a large amount of client assets, it should have been more than offset by the record inflows.
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