Pullbacks are good in a bull market, particular the gap-down pullbacks offering investors a chance to get into shares they missed on a slight sale. We discussed in-depth the inflow of capital into stocks along with the rotation out of cash and bonds. Now we have an even larger figure for inflows of capital into the U.S. stock market.
TrimTabs Investment Research now says that investors poured a record $77.4 billion into U.S. mutual funds and exchange-traded funds during the month of January. The prior record was listed as some $53.7 billion in February 2000.
TrimTabs does at least have a warning here: record inflows should make contrarians very nervous because inflows into funds have historically coincided with market tops. The prior record cited above coincides with just before the technology stock bubble burst. One more warning exists as well. Last week came a TrimTabs report that the Fed is creating $4 billion a day to keep the wheels on this machine greased.
The public has missed out on most of this rally and that is a crying shame. 24/7 Wall St. wants to put one key thought into the minds of the public and for investors: pullbacks, including market crashes, might actually be your friend.
This weekend we saw that Barron’s is calling for a new record on the DJIA. Here was our take on why we have an unofficial upside to our formal 14,590 DJIA price target for 2013.
Jon C. Ogg