Do You Hear that Rushing of Water? Is My Tidal Wave Approaching?

From AOL Daily Finance today, a look at whether or not Mom and Pop are back in the stock market:

“In the past couple of weeks you’ve seen a shift from flows to fixed income back into stocks…a couple of weeks ago, we had $2 billion of inflows into fixed income. Last week it was only $300 million. That money is now going into the stock market.”

– Cort Gwon, director of trading strategies and research at FBN Securities.

The strategist explains that investors are seeing their quarterly statements from 9/30 and observing that stocks are up while their bonds yield almost nothing.  I told you that I saw this exact shift coming on October 14th (When the Levee Breaks).

Talking to investors recently, I have noticed a very specific sentiment change.  I can’t say whether September 30th brokerage statements were the trigger, but they are aware of the relentless drum beat of new highs and they want to be a part of it.

The knee-jerk reaction of the professional market watcher would be to take this retail interest as a sign of a market top – but there is a problem with that – no one is in yet!  Retail equity participation is still at historically low levels, money market fund assets are still high and the pent-up river of cash held in short-term bond funds hasn’t even begun to flood over onto the stock side.

Combine this with the fact that stocks have essentially done nothing for ten years and I believe my tidal wave possibility is even closer to being a reality.

Sources:

Retail Investors Are Finally Warming to Stocks (DailyFinance)

When the Levee Breaks (TRB)