Equity market on the rise – Equity mutual funds and ETFs still draining assets. This is unprecedented. When and if the mutual fund outflows turn into inflows the market will likely accelerate.

The strength in the equity markets this year has been driven by institutional allocation of assets even though hedge funds are still in a highly short posture.  The persistent drain of assets from equity mutual funds and ETFs displayed in the following chart from Bianco Research will come to an end.  We can observe that there were net inflows in 2005 and 2009 following recent Presidential elections.  Inflows will drive stock appreciation.  Anecdotally, Fidelity has reported they have more funds in bond funds than in equity funds – this has never happened before.  This too may be a strong contrarian sign that investors are too bearish.  Jeb Terry, Sr. October 16, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment

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