Fundy Money
December 1st, 2006 by Justin
Hedge funds recently ticked up above the $2 trillion mark after record monthly inflows. Mutual funds, not to be outdone, themselves passed the $10 trillion mark according to the Wall Street Journal:
Mutual-fund assets surpassed $10 trillion for the first time in October, according the fund industry’s trade group, the Investment Company Institute. Mutual-fund assets increased from September by $286.6 billion, or 2.9%, to $10.01 trillion in October, the ICI said. Long-term stock, bond and hybrid funds — which combine both stocks and bonds — took in $24 billion more than investors pulled out, up from $11.8 billion in September.
Contrarians will scream that this must mean a top for all markets. When retail (read: uninformed) investors start piling in, the markets must have already risen far enough for the big players to get out. And they’d be right, historically. The largest ever inflow of money to the stock market occurred in the first quarter of 2000, at the precise top of the tech bubble. However, retail involvement can often occur near a top, but not necessarily signal a top. In my view, the markets have a bit more steam left in them and new DJIA highs are right around the corner.
