Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Record month for January makes experts increasingly nervous

Record month for January makes experts increasingly nervous

US-domiciled equity and mutual funds welcomed record inflows of $77.4 billion (£44.18 billion) during January, but the wave of cash pouring into stocks has left liquidity experts feeling nervous.

The TrimTabs Weekly Liquidity Review for January is the latest in a string of reports to confirm equity inflows hit a peak at the beginning of the year, and surpassed the previous $53.7 billion record for inflows set in 2000 by a whopping $23.7 billion.

While the figures are no doubt welcome news for the providers of the all-equity mutual funds and exchange traded products tracked by TrimTabs, it is feared support for stock prices has grown fragile even though investors seem oblivious to the underlying, building trend.

'We do not believe most investors realise just how much money has poured into equities this month.  These unprecedented flows should concern contrarians because the stock market tends to perform poorly after such heavy buying,' said the consultancy's chief executive officer David Santschi.

Santschi said that despite risk of losses, investors' enthusiasm for equities is unlikely to change over the near-term, pointing to strong ETF buying, with only leveraged funds - used to express short-term tactical bets - sceptical of the rally.

Faber is selling

In contrast, Marc Faber last week announced he had started to sell equities on fears the rally may be headed down the drain and at the end of January he began positioning for a correction.

Faber (pictured) argued that at a macro level very little had changed, with Europe still facing its problems and in the US the debt ceiling and fiscal cliff negotiations had only been partially resolved.

'I am reducing positions because there is euphoria building up,' Faber explained, adding that against this gloomy backdrop corporates were bound to disappoint.

Despite this, stock markets have held up fairly well and in the face of a contraction in growth America's S&P and Dow Jones last week clung on to its gains. UK markets have been slightly less resilient to bad news, and on Monday shed more than 70 points on fears about the government's bank segregation plans, pulling the FTSE 100 down from its four and a half year high.

Confidence was also knocked as 10-year Spanish bonds crept up.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
When Brewin's Gutteridge met BlackRock's easy Rieder

When Brewin's Gutteridge met BlackRock's easy Rieder

Following Federal Reserve chair Janet Yellen’s testimony, Ben Gutteridge, head of fund research at Brewin Dolphin, grills Rick Rieder, CIO of fundamental fixed income at BlackRock.

Play Sam Vecht: the best opportunities in frontier markets

Sam Vecht: the best opportunities in frontier markets

Blackrock's Vecht evaluates frontier markets and explains where he sees the opportunities

Play Where A-rated Pattullo is finding the best bond opportunities

Where A-rated Pattullo is finding the best bond opportunities

Henderson Global Investors head of retail fixed income explains how he is managing his fund against the surprise current monetary policy divergence.

Your Business: Cover Star Club

Profile: meet the man building Towry into an £11bn giant

Profile: meet the man building Towry into an £11bn giant

As a former engineer who worked on Hong Kong International Airport, Rob Devey is not afraid of taking on major projects

Wealth Manager on Twitter