Tuesday, November 10, 2009

Balloon Country II

clipped from www.thebigmoney.com
In other words, you’d expect the modest amounts put by such funds into the U.S. equities market following the March drop to be increasing by leaps and bounds right about now. Instead, they’re moving in the other direction.  

One could make the bullish case that what’s going on here is that mutual fund inflows are just late to the rally as usual, but that’s not the case. Inflows are a glimpse into Main Street sentiment, and the fact that they’re diverging so sharply from the Wall Street party line is telling. The stock market might be climbing, but retail investors have no confidence in it. They’re worried for their jobs, their homes are under water, and they’ve pushed back their retirement dates—all of which means they’re also continuing to pare their spending and borrowing. Wall Street can coast along for a while on government generosity and companies squeezing profits out of increasingly anorexic balance sheets, but that’s not going to continue forever.