Are investors pulling their money and parking it in savings accounts? Read this investor insight by TrimTabs Asset Management to learn more about recent bond mutual fund and ETF flows as well as supply and demand activity with the stock market.
A record $79.7 billion has been pulled out of bond mutual funds and exchange-traded funds since the start of June ($67.9 billion in June and $11.8 billion in July through Thursday, July 11). The latest data suggests most of this money has been making its way into savings deposits and retail money market funds. In the five weeks ended July 1, savings deposits took in $74.8 billion, while retail money market funds took in $33.0 billion. Far less of the money seems to be flowing into equities. All equity mutual funds and exchange-traded funds have received $20.8 billion since the start of June.
Given the unprecedented outflows from bond funds and the turmoil in the bond market, we were not surprised that Federal Reserve Chairman Ben Bernanke offered the markets some soothing words last week, which promptly cheered investors. Unfortunately for the bulls, our demand-side indicators have deteriorated, particularly for the short term. Investors in leveraged ETFs turned much less pessimistic in the past week, which is negative from a contrarian perspective. Outflows from leveraged long ETFs plummeted to just 0.6% of assets, while inflows into leveraged short ETFs slowed to 2.4% of assets. Another cautionary sign is that investors in U.S. equity ETFs are turning upbeat. These ETFs issued $16.6 billion (2.0% of assets) in the past month, the highest trailing one-month inflow since June. We pay careful attention to ETF flows because ETF investors tend to be poor market timers.
On the supply front, U.S. companies have been net buyers of shares. In Q2 2013, they announced $257.1 billion in new cash takeovers and new stock buybacks, the highest volume since Q3 2007. This buying swamped the $80.1 billion in new offerings. Since the start of June, announced corporate buying (new cash takeovers + new stock buybacks) of $80.2 billion has been $52.2 billion higher than new offerings of $28.1 billion. But the new offering calendar might be a bigger headwind to the market this week than it has been recently. Dealogicreports that 13 deals-including nine IPOs-expected to raise a total of $2.0 billion are already scheduled, and the flow of overnight deals could pick up with the S&P 500 sitting at a record closing high.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: AdvisorShares is an SEC registered RIA, which advises to actively managed exchange traded funds (Active ETFs). This article was written by Minyi Chen the portfolio manager of the AdvisorShares TrimTabs Float Shrink ETF (NYSEARCA:TTFS). We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. This information should not be taken as a solicitation to buy or sell any securities, including AdvisorShares Active ETFs, this information is provided for educational purposes only.
Additional disclosure: This communication is a publication of TrimTabs Asset Management. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Information presented does not involve the rendering of personalized investment advice. Content should not be construed as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein. Performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing performance returns. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Past performance may not be indicative of future results. Therefore, no investor should assume that the future performance of any specific investment or investment strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions, may materially alter the performance of an investor's portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor's portfolio.To the extent that this content includes references to securities, those references do not constitute an offer or solicitation to buy, sell or hold such security. AdvisorShares is a sponsor of actively managed exchange-traded funds (ETFs) and holds positions in all of its ETFs. This document should not be considered investment advice and the information contain within should not be relied upon in assessing whether or not to invest in any products mentioned. Investment in securities carries a high degree of risk which may result in investors losing all of their invested capital. Please keep in mind that a company’s past financial performance, including the performance of its share price, does not guarantee future results. To learn more about the risks with actively managed ETFs visit our website AdvisorShares.com.