More Juice For The Stock Market?
Over the past few months, I have included retail investor mutual fund flow
data in my observations in an effort to demonstrate to the readers of this
column that the average investor continues to be underweight equities on a
relative basis. Today, for continuity’s sake, I would like give readers some
sense of institutional sentiment towards equities and specifically discuss
pension fund holdings of US stocks.
In its latest release of fund flow data, the US Federal Reserve reports that
US equities make up 39.8% of the $3.6 trillion worth of financial assets held by
private pension funds, as evidenced in the chart below. To give readers an idea
of how this measures up on a historical basis–for the past thirty years–the
average equity holding as a percentage of total financial assets has been about
43.1%. By this measure, pension funds, like retail investors, are underweight
equities–by about $117 billion if one uses the historical average as a measure.
Any meaningful pickup in the US economy in the months and quarters
ahead–which I expect–could very well be greeted by meaningful equity buying by
US pension funds, giving the S&P 500
(
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PowerRating) and the broader market
indexes some more juice into year end.Â
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