Editor's note: The stock market has pulled back this month. Investors are worried that 2022's declines will return with a vengeance. But according to Briton Hill from our corporate affiliate Chaikin Analytics, one measure shows just how irrational those fears have become. In this article – which was originally published in the free Chaikin PowerFeed e-letter – he explains the details... including why running for the exits might be a worse mistake than you think.

Stocks have entered a new bull market...

At the same time, the American consumer is doing better than the mainstream media will ever tell you.

Despite that, investors are looking for safety. They're holding more cash than ever.

In fact... nearly $5.57 trillion is sitting on the sidelines right now.

That's right.

This isn't a squishy "it feels like folks are fearful" type of thing. Using one official indicator, we can see that investors are hoarding cash. They're still worried about what might come next.

But all the data we have shows that they're making this move at the worst possible time...

Folks, if you don't know already, I'm talking about cash holdings in money market accounts.

When an investor sells a stock, the cash usually goes into their money market account. And they can park the cash in the account as long as they want.

The total value of money market accounts ebbs and flows over time.

If the value is dropping, it tells us that mom-and-pop investors aren't worried. And when it's soaring, we know that these investors are fearful. They're choosing to sit on the sidelines.

That's exactly what we're seeing today. Take a look...

This is a quarterly chart. As of last week, though, the total value of money market accounts is close to $5.57 trillion. And perhaps more significant, the value of these accounts shot up a lot recently.

This trend is important...

You see, the value of money market accounts is what we call a "real-money indicator." It shows us what everyday investors are doing with their money at any given time.

In other words, we can see how investors are feeling by looking at their actions.

Now, we can expect the value of these money market accounts to gradually grow over time. After all, inflation pushes them higher as more and more money enters circulation.

But in this case, the massive jump on the far-right side of the chart is noteworthy. You'll notice that the recent move is more extreme (steeper) than most of the past 40 years.

We can also use additional data to confirm this shift...

Specifically, we can look at U.S. equity-fund flows.

This data shows that investors are undoubtedly fleeing stocks – even as the market rallies. For example, U.S. equity funds recently experienced nearly $15 billion in net outflows in the seven days leading up to August 9. It was the largest week of net outflows since late June.

This is a particularly dangerous decision for individual investors. History shows us that many of the market's biggest moves higher happen during a recovery.

That's exactly what we're seeing this year...

The broad market has soared from its October 2022 lows. Even after this month's dip, the S&P 500 Index is still up around 23% since then. And Big Tech, the hardest-hit sector last year, has soared in 2023.

And yet, the data show that investor fear is at an extreme level.

People are waiting for the other shoe to drop. In doing that, they're ignoring the tremendous market opportunity right in front of their faces.

Folks, I understand playing defense.

But sitting on the sidelines is often a more dangerous financial decision than many folks realize. And a new group of investors is in the process of discovering that today.

Where will they be when they realize they've missed the first year of a new bull market?

Don't fall into that trap.

Good investing,

Briton Hill

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