According to a study published in the Financial Analysts Journal, equity ownership has fallen to the lowest level in more than a half-century. In 2012, investors held a mere 37.7 percent of their portfolios in equities. That was out of a grand total of $90.6 trillion in investable assets around the world.

Over the past three decades, U.S. investors’ portfolio equity exposure has run at a historical average of about 60 percent. Think of this as the classic 60/40 stock-bond allocation.

In the early 1980s, investors reduced their equity exposure to just 45 percent. In the late 1990s, it rose to 75 percent and higher. A 15 percentage-point swing in either direction is an indication of extreme sentiment. Savvy contrarians can make a bet in the opposite direction with a high degree of confidence.

Today, the equity allocation is a modestly elevated 65.3 percent among the 150,000 members of the American Association of Individual Investor, which tracks individual investor behavior. Given last year's 30 percent gain in the Standard & Poor's 500 Index, it is reasonable to guess that much of this increase was from price appreciation in existing equity holdings, and not due to a newfound love of stocks. Meaning, we are not seeing the sorts of sentiment moves that indicate a bubble.

David Fuller's view

Here is Barry Ritholtz's article.

He makes some good points in this article, which may interest subscribers. 

Regarding the last paragraph above, I think he understates the extent to which US equity investors were piling in last year.  Also, we certainly saw some bubble activity in new tech and biotechnology shares.  I regard those excesses are a lead indicator but clearly they have not yet dragged down the broader market.

Stock market risks inevitably increase with higher valuations and I maintain that 2014 will remain a somewhat choppy year for Wall Street.  However, downside risk appear limited to sharp reactions for overextended / overvalued sectors and shares.