Where Are Investors Putting Their Money?
For the week ended September 3, AMG data is reporting that equity funds–including
those that invest abroad–posted net cash inflows of $4.5 billion. Within this category,
$1 billion went into domestic small cap funds and $457 million went into
domestic aggressive growth funds. Year to
date, equity funds have reported inflows totaling $76 billion–which is still
below average considering that during the first half of the year for the past five
years, equity funds have reported inflows of $70 billion.
Taxable bond funds witnessed inflows totaling $ 399 million for the week
ended September 3. Aggregate inflows for this year however, total $80 billion,
which is dramatically more than the amount reported during the same period in
1998 (+$44b), 1999 (+$20b) and 2000 (-$60b).
A sustained trend in outflows from bond funds into stock funds would signal
capitulation by the remaining bearish investors, which, in my view, would then
suggest that caution should be exercised by equity bulls. Until that time
however, there is still plenty of money on the sidelines–not only on the part
of retail investors but also on the part of pension and foreign investors–to
feed further gains in the S&P 500.
The chart below illustrates periods of extreme shifts in mutual fund flows
relative to the Wilshire 5000 and has been a good contrarian market
indicator during periods of extreme inflows/outflows, such as in 2000 and last October.
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