What Fund Flows Are Telling Us
As I have mentioned
in the past, investor fund allocations are worth paying attention to
during periods of perceived market bottoms or tops, as they are often good
contrarian indicators. As such, the fund flows data for the week ending April 9
is out, and the results show that investors are starting to take on more risk in
their choice of allocations, both in bonds and stocks…
Equity allocations
Stock funds reported a second week of
inflows, netting of $127 million. However, US equity funds reported $1.1
billion of inflows while international equity funds saw $989 million of net
redemptions. Energy and gold mutual funds continued to see outflows, and real
estate, health and equity income funds saw inflows.
Bond allocations
Taxable bond funds saw net inflows of $2.7
billion. Importantly, however, two thirds of this inflow went into high-yield
bonds while the rest went into investment grade corporate bonds. Municipal bond
funds reported $383 million in outflows for the same period. Money market funds,
on the other hand, saw $7.6 billion of inflows last week from institutions and
outflows of $2 billion from retail investors.
Overall, US investors purchased $10.1 billion of
mutual funds during the week. But cash, as a percent of the Wilshire 5000 index,
is still at all-time high levels (a high ratio is usually proceeded by a market
bottom).