November 10, 2013
Weekly Market Outlook
By Mish Schneider
In my high school days I was a lifeguard so maybe this image means something a little bit different to me, but I think you’ll get the idea.
This morning I opened the Wall St. Journal and read, “More money came into U.S. stock mutual funds in the week of Oct. 23 than during any other week since 2007.” I have no reason to doubt this statistic, but I decided to do a little digging into this data myself.
While the chart I created below, Chart 2: Weekly Equity & Bond Fund Flows, doesn’t confirm the WSJ fact exactly, it does show the same point in a very interesting way. What’s clear is that with the exception of a brief period in the beginning of 2011, October 2013 has been the first month since at least 2007 that stock inflows have outpaced bond inflows!
Additionally, early October recorded a level of equity fund inflows which has only been matched once (Jan. 2013) since 2007.
And not only have equity inflows been strong… bond funds have experienced the biggest out flows they’ve seen since at least 2007!
Quite frankly, the popular media reporting has led me to believe that that the retail interest in stocks was still quite “dead”. Now I’m not so sure, and this doesn’t even consider the Twitter IPO which at this point could only help fuel a retail appetite for an alternative to bonds.
Chart 2: Weekly Equity & Bond Fund Flows
Are stocks back on top!?
Has the great rotation from bonds to stocks begun in such a way that not even the dreaded ‘Fed tapering’ will slow down this bull market’s advance?
The Bullish side of me welcomes the return of retail money for the sake of a long-term bull market. However, my youthful lessons as a lifeguard are grappling with the need for, vs. the frightful implications of, Mr. Market realizing that it’s probably time for a “buddy check” !
For any trader who doesn’t remember the pros and cons of a buddy check…
If you’re not prepared, then it’s no fun getting out of the water and scrambling for (your common sense or) your buddy that you so carelessly ignored because you were chasing the day’s excitement.
And if the fear of getting in trouble for losing your buddy doesn’t get your attention here, then you may also recall that after the initial mayhem of a buddy check… It’s always fun to have the best plan for being first one back in the water!
Either way, it’s time to make sure you have a plan. This week’s Market Outlook video should help you get started by figuring out what to expect from Mr. Market over the next few days and weeks.
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