$277 billion into stock funds so far this year; highest since 2000

$277 billion into stock funds so far this year; highest since 2000

October 29, 2013, 12:03 PM



Here’s one more piece of evidence that investors are going gaga for stocks (as if the 32 record closes for the S&P 500 this year, including on Monday, a NasdaqComposite up 30% and fat valuations for unprofitable tech companies weren’t enough): Huge inflows into stock funds this year.

The wall of cash into U.S.-listed mutual funds and ETFs (including those that invest overseas) has hit $277 billion, and that’s with just over two months to go in the year, according to TrimTabs Investment Research. That’s the most for one year since $324 billion for all of 2000, which of course is the year the last tech bubble burst.

About one-sixth of that money has been invested this month. TrimTabs says the net $45.5 billion through Oct. 25 is the fifth-highest monthly inflow on record. (The two biggest monthly numbers also came this year: $66.3 billion in January and $55.3 billion in July). A big driver has been the Federal Reserve’s surprise decision not to begin tapering its monthly bond purchases, which means interest rates are likely to stay low for longer (and making safe-haven bonds less attractive).

The story is the same in Europe, where money has flowed into stock funds for 17 straight weeks, including a record $5 billion in the latest week, according to Bank of America Merrill Lynch. Since June, inflows have totaled $83 billion.

But as is often the case with mom and pop investors, their timing may be less than impeccable. If it’s not another case of “buy high and sell low,” it may at least be “buy high”.

Goldman Sachs, for one, has declined to raise its year-end price target for the S&P 500 of 1,750, which is slightly below where the market now trades. Instead,  its portfolio strategy team, led by David J. Kostin, says it expects the S&P 500 to hover around current levels through year-end.

BlackRock’s Russ Koesterich, the investment giant’s global chief investment strategist, puts his view this way:

Quote :

“While a more benign rates environment should be good news for stocks, equity markets will have to manage a delicate balancing act. If the economy stalls further, corporate earnings estimates will likely be reduced, which would hurt stocks. In contrast, however, an acceleration in economic growth would reignite concerns over the potential for interest rate increases.
Put another way, for stocks to continue to make gains, we likely need to see a continuation of the not-too-hot, not-too-cold “Goldilocks” economy that provides for modest growth, high profit margins, and an accommodative Fed.”

Also read: Avi Gilburt says the S&P has moved into the danger zone.


No surprise that the losers this year have been bond funds, which are seeing net redemptions for the fifth consecutive month.  Outflows this month through Oct. 25 have hit $17.8 billion, part of $140.6 billion that has fled fixed-income mutual funds and ETFs over five months.


http://blogs.marketwatch.com/thetell/2013/10/29/277-billion-into-stock-funds-so-far-this-year-highest-since-2000/