Here come the cabdrivers.
That’s perhaps an exaggeration, and we like cabdrivers as much as the next guy, but the individual investor is beginning to make him- and herself felt. Some might take that as a toppy indication, but such capital movements can go on for a long while.
The stock market finished a third straight week of gains Friday, taking the Standard & Poor’s 500 index to yet another record close, 1759.77. At one point the index had jumped 100 points, or 6%, in just ten days from Oct. 9.
That kind of move on not much new in the way of fundamental support has traders feeling happy, cautious and confused, all at the same time. The market rise hasn’t come on economic data or corporate earnings—decent considering the poor sales growth—but apparently on confidence-fueled momentum.
Institutional money managers aren’t selling stocks, and the newfound animal spirits of the individual investor can be seen in “big, frothy inflows” to equities, as a recent report from Bank of America Merrill Lynch put it. Equity funds saw inflows of $21.4 billion for the week ended Oct. 23, with $6 billion into long-only funds, the largest in nine months.
On the week, the Dow Jones Industrial Average rose 1%, or 171 points, to 15,570.28. The Nasdaq Composite index picked up 29 points, or 0.7%, to 3943.36.
The Federal Reserve continues its easy-money policy and “won’t take away the punch bowl any time soon,” says Michael Marrale, head of Research, Sales and Trading at Investment Technology Group. He’s seen good flows recently from U.S. sources into European equities. The BofA Merrill Lynch report says $5 billion went into European equities last week, the largest weekly inflow on record.
That kind of inertia is a tide the bears might find tough to reverse. Through year end, fund managers won’t be selling and hedge funds will be chasing performance (Source: Barrons Online).