Bull market is alive and well – but stock market breakneck rebound from fourth quarter is not accompanied by rising inflows. There may be a good reason for that.
According to Société Générale analysts, fund investors are already heavily weighted against risky assets and note that equity and credit positions accounted for 64% of the investment pool covered by EPFR Global on a monthly basis.
In other words, it is not the case that cash is parked on the sidelines, which gives a fear of missing out, or "FOMO" that the market collects.
"Instead of Investors are heavily weighted in risky assets in absolute numbers, and at 90% of the highest historical level, analysts say in a Wednesday match, illustrating the point in the charts below.
S & P 500
on Tuesday posted a record near, topped its previous Sept. The 20th end as the main US stock market market completed a quick tour of a fourth quarter selloff who had pushed it to the brink of a bear market in December.
Read: Stock markets call records and bonds also collect
also returned to record area Tuesday while the Dow Jones Industrial Average
remains less than 1% during its all-time closure high from early October. Stocks could not maintain momentum on Wednesday, adding a slightly lower finish.
Need to know: Don't be fooled by these fresh heights for stocks, warn analyst
And just like the fourth quarter route was not a single US phenomenon, global stocks have also jumped back solidly. The MSCI World Index, which measures large and midcap performance in 23 developed countries, covering around 85% of the free flow market in each country, is up to 15.4% so far in 2019, against a 17.1% increase for S & P 500 The MSCI World Index ex-USA is up 12.4% over the same stretch.
But over the past three months, the rally has seen net dividends of $ 69 billion, most of which ($ 2 billion) come out of European stocks. The analysts argued that after a strong rally, outflow "would be interpreted as a controlled way to reduce the risk of taking profits in a favorable market environment."
SocGen's interpretation is contrary to warnings that the stock market could be on the verge of a wave higher as investors left the rally rush back into the market. Larry Fink, CEO of BlackRock Inc., the world's largest real estate manager, warned the stock market was "melting up" if investors with substantial uninvested funds rushed into the market.
See: The stock market at risk of melting, not a meltdown, warns BlackRocks Larry Fink
A melting is a phenomenon where an asset gathers strongly as investors stumbled into the market, driven by a fear to miss a rally rather than underlying basics. Such melts are often followed by strong downturns in the market.
SocGen analysts argue that another two months of strong market development may be needed "to reach a point where" a lot of sideline money "is desperate to come back in fear of missing out."