Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Smart Money Trend: Capital Preservation Driving Market Flows

|Includes:iShares Core Total U.S. Bond Market ETF (AGG), BBND, CIU, EEM, EFA, GSG, HYG, ICFI, IEF, IWM, IYR, JNK, MBB, MDY, MUB, PHB, QQQ, SHV, SHY, SPY, TLT, VEU, VNQ, VWO
Monitoring where asset allocation funds are putting their money gives an indication of whether fund managers are being more conservative or aggressive this week. MyPlanIQ's smart money indicator is derived based on comprehensive analysis of top asset allocation Gurus' recent asset exposure. Currently, it tracks the aggregate asset exposure to U.S. equities and bonds.

We track two separate indicators:
  1. Top 3 Moderate Allocation Funds (Smart Money)
  2. 481 Moderate Asset Allocation Mutual Funds (Pro Money)

This is calculated weekly and covers the last one year. For the week ending 12/10/2010, our proprietary model reported the equity exposure of the Top 3 Funds was 50.4% and 66.4% for the 481 Moderate Asset Allocation Mutual Funds.

Trends for the Top 3 Moderate Allocation Funds (Smart Money)


481 Moderate Asset Allocation Mutual Funds (Pro Money)Click to enlarge

Two weeks ago, we saw that falling bond values have caused investors to build up an overweight in equities. This past week, money managers were again tweaking asset allocations to the benefit of the perceived safety of fixed income and lowered their equity exposure. We believe the underlying economic force shaping this decrease in the appetite for risky assets has been the desire for capital preservation near year end with no long-term implication.

That said, a more pessimistic but objective view offered by John Hussman paints an alarming picture on the current markets: he characterizes the current states of the markets as "overvalued, overbought, overbullish, rising-yields" and the usual large losses followed. 



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Stocks: AGG, BBND, CIU, EEM, EFA, GSG, HYG, ICFI, IEF, IWM, IYR, JNK, MBB, MDY, MUB, PHB, QQQ, SHV, SHY, SPY, TLT, VEU, VNQ, VWO