The proportion of retail investors holding equities increased significantly in the last three months, while those holding cash assets fell, according to data from the latest quarterly Retail Investor Beat, from online broker eToro.

In the study of 10,000 retail investors across 12 countries, those holding stocks listed in their local market grew by more than 10%, from 49% to 54%, while the increase in retail investors holding internationally-listed firms was even more significant, jumping 16%, from 31% to 36%. Meanwhile, those holding cash assets fell from 69% to 67%.

In the research, retail investors are defined as self-directed investors who hold any traditional investment (such as shares, bonds, funds or commodities) or financial derivatives. The jump in equity allocation amongst this group follows the Federal Reserve cutting interest rates for the first time in four years last week, signalling an end to the most generous savings rates.

Commenting on the data, eToro Analyst Sam North, says:

“With the Fed finally pulling the trigger on interest rate cuts last week, we are seeing the beginning of the end for bumper savings rates. This will inevitably lead to more people looking to the stock market to achieve a better return on their cash and we’re already beginning to see this. A lower interest rate environment is also good for listed businesses, meaning we can expect earnings to remain resilient or even grow, which further supports equity markets. As a result, investors are likely to continue reallocating funds from cash to equities in search of higher returns.”

Whilst investors from virtually every generational group are more likely to be holding equities than they were three months ago, the trend is most pronounced amongst millennial investors (those aged 29 to 43). Millennials holding stocks listed in their local market jumped 16% quarter-on-quarter (from 45% to 52%), while those invested in foreign-listed companies jumped 24% (from 34% to 42%).

The trend was far less pronounced amongst the youngest cohort of investors, Generation Z, where in the last three months, the proportion holding local and international stocks increased 5% and 7% respectively. Perhaps unsurprisingly, following a nearly two-year bull market, the oldest cohort, the so-called silent generation born between 1928 and 1945, reduced exposure to stocks.