Are investors coming back?

For the first time since 2011, real money may be returning to stocks.

By Anthony Mirhaydari Nov 30, 2012 2:18PM

Image Stock market report copyright CorbisSince the August 2011 debt ceiling negotiations went badly and Standard & Poor's cut America's AAA credit rating, retail investors have lost their appetite for stocks. In the market chaos that ensued, they moved into cash and bonds. And in the economic turbulence that followed, they've largely stayed there.

 

In fact, given the market strength of the last few weeks, the resistance to participate has resulted in the largest divergence between rising stock prices and barren mutual fund flows since the 2002 bear market turn.

 

Until now. 


Fresh data from research company EPFR suggests that a positive surprise on a short-term extension of the fiscal cliff, the likely "QE4" stimulus announcement from the Fed in a few weeks, and the positive seasonality the market enjoys this time of year could all combine to unleash a massive wave of short covering and catch up buying as investors chase a market that's already moved away from them.

 

 

According to their fund flow data, in the fourth week of November U.S. equity funds attracted over $10 billion in net new inflows -- the best showing in more than a year.

 

New-found optimism also increased appetite for other risky asset classes, including emerging market funds (inflows hit a 10-week high) as well as "junk" or high-yield bonds and alternative assets.

 

Overall, equity funds recorded a near $15 billion inflow during the week ending November 28 -- the second highest total year-to-date.

 

Here's the kicker: Recent buying has been driven by institutional, professional traders. Average, retail investors pulled money out during the week for the 46th time in the 48 weeks year-to-date.

 

 

If recent market strength continues into next spring before the threat of the debt ceiling forces Washington to make hard decisions on taxes and spending, these folks could get caught out.
I'm expanding the long exposure of my Edge Letter Sample portfolio with the addition of Google (GOOG), Credit Suisse (CS), and Santander (SAN) as big tech and European banks show some buying interest.

 

Disclosure: Anthony has recommended GOOG and SAN to his clients.

 

I found these positions with the help of technical screens developed with Fidelity's Wealth Lab Pro back-testing tools, which you can find here. (Fidelity sponsors the Investor Pro section on MSN Money.)

 

Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

 

34Comments
Nov 30, 2012 3:39PM
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Institutions elevating the market while retail investors are still pulling out. Further proof that banks are speculating with 0% Fed. funds on the backs of every American. Stop the insane QE's. Lets get back to real markets and solve our economic problems. People need to save and banks need to lend according to the historic model of banking, not this infused capital at the expense of our future QE model. Real recovery can't happen with this false no job economic model.
Nov 30, 2012 4:15PM
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Any recovery will be short-lived if the size and cost of govt is not dramatically reduced.
Nov 30, 2012 4:07PM
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If retail investors are moving back into stocks now, their timing is lousy. Now is the time to pull back, convert to cash, and wait for the fiscal cliff nonsense to blow over, right?
Nov 30, 2012 4:17PM
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Of course, the stock market does not measure the health of the economy.  It simply measures investors' confidence in big business, which is often antithetical to the health of the economy.
Nov 30, 2012 7:50PM
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Once again, Anthony is pulling ridiculous 'data' out of Never Neverland. One week, it's the End of the World; the next week it's Uber-Recovery!! I find it very difficult to take anything he says seriously.
Why does MSN keep this clown on???
Nov 30, 2012 5:31PM
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You have tunnel-vision. Consider the variables... stocks are grossly overpriced, bonds may actually default, commercial real estate is about to nosedive and it is likely that big gainers will get taxed up the wazoo. Other variables... there is an infinite number of off-Wall Street opportunities. There is a huge opportunity in funding small businesses. There is- massive over-supply and a tremendous gap in skill sets, as well as a substantial need to local enterprise. With the likelihood of inflation in the coming months, the organized markets and certainly putting money with managers is foolish. You know what they say about fools and their money...
Nov 30, 2012 5:17PM
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our current president is underqualified to run the united states ,it takes more than a community leader and a chicago lawyer what a shame on our people

Nov 30, 2012 6:33PM
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I will say this till I'm blue in the face.WHY has the last 10 years produced an EXTRA 10 trillion dollars in tax receipts over the previous 10 years? Bush Tax Cuts for everyone,less people paying taxes,more people unemployed.tax incentives on depreciation schedules allowing 100% write off on capital improvements up to $500,000.,two recessions(one the second worst in U.S. history) ,Why if the Democrats are correct aren't the tax receipts just the opposite?

Nov 30, 2012 6:57PM
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The market bets on future earnings; if the future looks good, the market goes up. If the market is unclear, it goes sideways. If anyone bets on another man's investments, your a fool. Due diligence, long term planned investments; ignore daily or short term moves, stick to your plan. 

Nov 30, 2012 7:26PM
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The fiscal cliff will be remedied as politically both sides need to avoid any tax increases....heh, they want to retain their jobs in two years. They're self-serving politicians!

 

Once the cliff saga is settled....in 4 weeks or so - the market should react strongly and surge higher. A huge relief rally for a short period of time. Then reality will once set in about the world turmoil along with our own 16 Trillion indebtedness.

 

Bottom line....the next 4-6 weeks could see some amazing gains! Yes, Virginia...there is a Santa (Rally)!

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There's another bigger problem out there. Colorado and Washington has legalized mary jane, and now Twinkies have gone away. Major riots to face soon.
Nov 30, 2012 3:56PM
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Antman....If they are coming back ?? It is a very slow pace...If this deal gets made, THEY(investors),

Will have some confidence...

(guess maybe you already said that)

Dec 1, 2012 11:42AM
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"Donald Trump to YouGov about its that suggests he’s to blame for a 45 percent drop in Macy’s popularity among women: “It’s total bull@!$%#."  "The survey is a joke. The person who did this is a joke," the Donald told TODAY regarding YouGov’s survey that saw a steep dropoff in the retailer's popularity after a SignOn.org petition asking Macy’s to “Dump Trump,” launched and began gaining over 670,000 digital signatures."

Sorry, Trump... no it isn't. You are a toxic billionaire with a foul mouth and a detached perspective of America. Your entire existence is trailer trash, much like the Walton heirs. Been in a Macy's lately? The last thing they needed was the anti-marketing that envelopes you. You made billions but a guy from KC flew into New York and handed out $100 bills to people who got a kick in the butt by a hurricane. You didn't. You made fun of people getting fired but no one in their right mind believes you aren't several cards short of a full deck. You are the epitome of what ails us. Macy's has the future of all prestigious brands riding on it's reputation, and your junk. Guess what goes because it blows?
Nov 30, 2012 9:08PM
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We only need to take a little info and advice from Anthony, then Jubak, Brush and Finklestein,maybe ideas and info from Charley, Jimmy and about 10 others....

I know I have forgot some but.....My apologies.....Anyway,,,

 

Put all this in a bag....Throw in some jelly, shake well;  Do not stir..

Throw contents of bag against Wall....

What sticks, GO WITH,.......Now quit bitching and get busy.

 

Dec 3, 2012 7:58AM
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show us your porfolio and record and then I"ll decide if you are real not just another talking head
Nov 30, 2012 4:21PM
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Sure Anthony, just like the Romney rally right?
Nov 30, 2012 3:41PM
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The underpinnings of the market are good.When this fiscal cliff is fixed it`s off to the

races.

Nov 30, 2012 3:52PM
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Anthony, You are the only analyst out there that gives the retail investor info they can use. Thanks
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