A notable disconnect continues to exist in capital markets since the end of the financial crisis back in early 2009. The stock market has continuously levitated and stands once again on the brink of breaking out to a new all-time high. Yet for much of the post crisis period, money flows have been streaming out of domestic stock funds. This has been particularly true over the past 18 months. A most notable deviation to say the least, and it suggests that the stock market remains on a perilous perch from which it is bound to eventually break.
The performance of the stock market and mutual fund flows have historically had a high correlation with one another. This, of course, makes good sense. For if investors are increasing the net amount that they are putting into domestic stock mutual funds, it means money is flowing into the market and stock prices… Read More …