Huge inflows to equity mutual funds last week

“Cash floods into stock Funds” – WSJ Jan. 11

“Money Pours Back in Stocks: ‘Have to Take This as Bullish’” – CNBC

“Stock Funds’ Huge Week: $18B Inflow Is Fourth Highest On Record” – Barron’s

The headlines are revealing.  Depending on which article you read, last week saw either the 2nd biggest equity fund inflows in history, the most since 2007, the biggest influx to long only equity mutual funds in 12 years, etc. . . . Just know that the inflows were fast and furious.  Some will argue that big inflows means we are at a top – perhaps – I suspect not.  Here is why. Looking at the chart from BofA Merrill Lynch below, we can see that when large inflows are sharp reversals to a string of persistent outflows, such as now and such as notably early 2009 and late 2010, they were precursors to more market upside.  That’s my read anyway.  We can know that all those funds have not yet been fully distributed across the spectrum of market caps and sectors.  The implication to me is that there is a ton of money available to flow to companies who report good earnings or provide improved guidance in the earnings season that has just begun. Jeb B. Terry, Sr. 1-12-13

4th Largest weekly equity fund inflow 1-11-13

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

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