It’s that time of the year again. And no, we don’t mean Valentine’s day, but rather an influx of equity inflows. Multiple news outlets have been reporting on the record-breaking inflows over the past month or so. Is this a result of economic indicators, or could it be something else?
As of January 2013, equity mutual fund inflows reached the largest on record since April 2000. Ringing in at $20.7 billion, Lipper’s Tom Roseen reports that investors and markets are responding to gains in stocks and the global economy. Some of these positive signs are a result of improvements in purchasing managers’ indices in China, the United States and the Eurozone,writes Lipper.
Joining the arena are Exchange-traded funds (ETFs), raking in approximately $6.9 billion in assets. The SPDR S&P 500 ETF fund alone brought in $4.6 billion of inflows during the final week of January.
Investors seem to have a taste for risk, as inflows pour in despite reports of dips in both home sales and fourth-quarter GDP. According to Lipper, the fixed income market also benefitted from this trend, with $1.4 billion flowing into corporate investment-grade debt funds and $800 million into flexible income funds.
USA Today’s John Waggoner also reported on these remarkable inflows. Waggoner brings up the contrarian notion—with all these inflows, does this mean a reversal is on its way? He writes “Contrarians figure that the time to leave the stock market is when everyone else is stampeding to get in.”
But what if this stampede occurs every year? Just a year ago, SunStar teamed up with Strategic Insight to delve into this phenomenon. At the time, the research showed that “for five of the past seven years, net mutual fund flows show that investing activity peaks each year during the first quarter.”
While you may be hearing the Twilight Zone theme playing in your head, look at the chart above to see the year-over-year pattern. Then consider these possible reasons to explain this trend cited in our year old posting entitled, The holidays are no time to take a holiday.
·
Year-end reviews by investors and their advisors
to:
o assess
performance and re-evaluating the funds they hold
o rebalance
for appropriate diversification
·
New investments from year-end bonuses
·
IRA/SEP/HSA contributions for the prior
year
·
Ambitious marketing plans by fund companies
start in January but phase out over time
So the question remains—should we be relishing the moment,
or bracing for Q2?
No comments:
Post a Comment