Tuesday, March 4, 2014

Mutual fund flows update




I haven't updated these charts for several months. What they show is a now-obvious "tipping point" that occurred during June 2013. That was the month that Treasury yields shot higher, ostensibly because of the fear of Fed "tapering." As I've argued, I think it was simply the market coming to the realization that the economy was strong enough to stand on its own and that the tapering and eventual reversal of QE was both justified and necessary. This "tipping point" marked the first time that the market became less concerned with owning equities and more concerned about owning bonds. That month there were relatively large inflows to equity funds and huge outflows from bond funds. Since then the market's aversion to bonds has tapered, and the market's enthusiasm for equities has been mixed (whereas before the market actively shied away from equities). I think this supports the notion that the market has become less concerned about the future, but not yet overly enthusiastic.

5 comments:

Benjamin said...
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Benjamin said...

Great charts.

Is America "under-optimistic"?

I think so. In every recession, the stories pour forth of perma-gloom, and 2008 was the grand-daddy of bad recessions.

On the other hand, eyeballing these charts we see the S&P has nearly tripled since the nadir, about when Obama took office. Somebody is optimistic.

It is a little unsettling to plot the S&P during the Clinton years, the Bush jr, years, and then the Obama years.....it is a chart that will never be seen in right-wing blog circles...

William McKibbin said...
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William McKibbin said...

Unfortunately, mutual fund investment flows tend to accelerate when stock values are relatively high, and to slow when values are relatively low -- I prefer to buy low and hold -- but, that's just me -- I believe that growth equities are overpriced today -- I advise sticking with high quality equities that pay reliable dividends and rents for this reason.

William McKibbin said...

PS: However, the best investment of all is to acquiring world-class skills that earn premium wages that convert into high quality dividend and rent-earning equities over a lifetime -- the best investment I ever made was in myself and my many skills -- I view world-class skills as equities -- teach your children, earn more and prosper through world-class skills in the global marketplace...