MONEY FLOW CONSENSUS (Positive Consensus/Bear Market Indicator)

January 2, 2015

It’s taken about 6 years but it looks like investors are now convinced the US stock market is for real and they are now going all in.

“Investors in U.S.-based funds poured $36.5 billion into stock funds in the latest weekly period, marking the biggest inflows on record as U.S. stocks surged to record highs, data from Thomson Reuters Lipper service…”

The numbers are truly staggering:

  • Money going into US only equity funds attracted $39 billion while non-US funds saw a $2.5 billion outflow.
  • Demand came from both retail and institutional investors. Mutual funds took in $12.8 billion while ETF’s took in$23.7 billion.

Some of this can attributable to year-end window dressing according to Jack Rivkin, Chief Investment Officer at Altegris, specifically: "You want that portfolio at the end of the year to look like you knew what you were doing for the whole quarter, and that's pushing more money into stocks." The S&P 500, which has risen about 13 percent this year, has risen about 6 percent in the fourth quarter.

We can thank J-Yel and the Club Fed for continuing to keep interest rates at abnormally low levels even though the US economy continues to gain meaningful traction. Investors like the vibes coming from Club Fed and are willing to put good money into the game. Many are just people undertaking some panic buying, trying to catch some yield they missed from most of the year. The market has had a good run. The question is what happens when the music and the party at Club Fed ends? Will people be oblivious to it or will they be cognizant enough to know to hang around the Exit signs nearby?