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The bull market is alive and well – but the dizzying stock market rebound after a fourth-quarter defeat has not been accompanied by soaring inflows. There may be a good reason for that.
According to analysts at Société Générale, investors are already investing heavily in risky assets, noting that equity and credit positions accounted for 64% of the investment pool covered by Global EPFR flow tracking.
In other words, it is not a case of money waiting, raising the fear of missing the "FOMO", while the market is recovering.
"Rather than being sidelined, investors are heavily weighted in risky assets in absolute value and at 90% of the maximum historical level," analysts said in a note on Wednesday, illustrating what point in the graphs below.
The S & P 500
SPX, -0.22%
On Tuesday, the closing record was broken, reaching its peak on Sept. 20 as the major US stock index finished a quick return after a fourth-quarter sell that pushed it to the limit of one. bear market in December.
Lily: Stock markets break records and bonds go back too
The Nasdaq composite
COMP -0.23%
also registered to register territory on Tuesday, while the Dow Jones Industrial Average
DJIA, -0.22%
remains less than 1% below its record closing level since early October. The shares were unable to continue their momentum on Wednesday, posting a slightly lower finish.
Should know: Do not be fooled by these new highs of stock, warns the analyst
And as the fourth-quarter defeat was not an all-American phenomenon, global equities also rebounded well. The MSCI World Index, which measures the performance of large and mid-cap stocks in 23 developed countries, covering approximately 85% of each country's free float market capitalization, has increased by 15.4% so far. in 2019, compared with 17.1% for the S & P 500. The MSCI World Index excluding the United States is up 12.4% over the same segment.
But over the last three months, the recovery has resulted in net outflows of $ 69 billion, most of which ($ 2 billion) came from European equities. Analysts have argued that after a strong recovery, capital outflows "should be interpreted as a controlled way of reducing risk by taking profits in a favorable market environment".
SocGen's interpretation runs counter to warnings that the stock market may be on the verge of escalating as investors left by the recovery rush into the market. Last week, Larry Fink, chief executive officer of BlackRock Inc., the largest asset manager in the world, warned that the stock market could "melt" if investors with substantial non-invested cash rushed to the market.
See: Stock market "merger risk, no merger," warns Larry Fink of BlackRock
A merger is a phenomenon in which an asset rises sharply as investors rush into the market, driven by the fear of missing a recovery rather than the underlying fundamentals. These mergers are often followed by strong market contractions.
SocGen analysts said it may take another two months of strong performance in the market "to reach a point where" a lot of money put aside "is desperate, he fears to come back in the fear of moving to side."
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