Minyi Chen, CFA, Chief Operating Officer of TrimTabs Investment Research and Portfolio Manager of AdvisorShares TrimTabs Float Shrink ETF (NYSE Arca: TTFS) shares recent fund flow trends.
- Investors Pour $54.2 Billion into All Equity MFs and ETFs in October, Third-Highest Inflow on Record. Bond MFs and ETFs Post Fifth Consecutive Monthly Outflow.
- New Offerings Surge to $23.6 Billion in Past Two Weeks, and Dealogic Reports $4.3 Billion Already Scheduled for This Week.
ETF flows suggest stocks will have a tough time moving much higher. Inflows into leveraged short ETFs stopped in the past week, which is a cautionary sign from a contrarian perspective. Even more worrisome, investors are pouring money into equities. All equity mutual funds and ETFs received $54.2 billion in October, the third-largest inflow on record. All three of the largest monthly inflows into all equity funds have occurred this year, and this year's inflow of $286 billion into all equity funds is the biggest since 2000. When fund investors are as upbeat as they are now, a short-term pullback would not be a surprise.
Supply indicators have been turning less positive for stocks on both the buy side and the sell side. Announced corporate buying (new cash takeovers + new stock buybacks) topped new offerings by only $11.0 billion in October, the worst reading since January. On the buy side, new stock buybacks averaged a respectable $2.0 billion daily in the first four weeks of earnings season, but number of companies announcing buybacks was very low at 1.7 daily. On the sell side, new offerings exploded to $23.6 billion in the past two weeks, and we expect new offerings to be extremely heavy in the three full weeks left before Thanksgiving. Dealogic reports that 15 deals expected to raise a total of $4.3 billion are already scheduled for this week, led by the much anticipated Twitter IPO. All else being equal, if new offerings keep topping $2 billion daily, this market will have a tough time moving higher.
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