Want To Stay On Top Of The Market? Follow The Money

by: Erik Conley

One way to get some perspective on what's going on in the market is to follow the money. (Incidentally, "follow the money" is a popular tag line, often attributed to "Deep Throat" of Watergate fame. But he never actually said that. It was first spoken by Henry Peterson, the Assistant U.S. Attorney during the Nixon administration.)

One shortcut to following the money is to look at Mutual Fund and ETF performance comparisons. The theory is that the top performing fund categories got there because they are attracting lots of money. I think that's a fair assumption, if you believe in the law of supply and demand.

To set the table, here is the population of this particular universe. ​

  • 8,016 Stocks (U.S. and non-U.S.)

  • 8,068 Mutual Funds (Yes, there are now more mutual funds than there are stocks.)

  • 1,743 ETFs (Including stocks, bonds, and a few hybrid mixes.)

​I'll start with a wide lens and then drill down into more granular views. Morningstar does a great job of tracking just about every aspect of the mutual fund and ETF universe. A review of performance by category reveals some early clues.

Morningstar separates its fund data into categories. I think there are about a dozen, but I only used eight for brevity purposes. You can see them all on Morningstar's website, if you're not into the whole brevity thing. (Extra credit if you can name the movie reference.)

fund returns 1

I don't think you need me to tell you what you can see with your own eyes, so I'll keep it short. Growth is beating Value, and the duo of Tech & Financials still rule the sectors.

Non-U.S. stocks seem to be doing even better than U.S. stocks. At least to my eyes.

fund returns 2

The returns in Bond Land are all over the map. And, Munis are looking a little punk.

fund returns 3

The Alternatives could be the most interesting category. I only selected the top three performers, because the names quickly become unfamiliar. But I admit that I was surprised to see the two volatility plays (short volatility) putting up these numbers.

Yes, we all know that volatility is at generational lows right now, but volatility is notoriously hard to play. Hats off to anyone who caught this great wave.​

fund etf 3

I took the liberty to combine several international sub-categories into a single table. (Again, for brevity purposes.)

There are some interesting nuggets of intel in this table. And, it seems to reinforce the notion that the U.S. is doing great, but non-U.S. is doing even better.

fund etf 2

Last, I have some highly specialized ETFs that are attracting attention and money.

fund etf 1

Bob Dylan once said that "You don't need a weatherman to know which way the wind blows." That may be true, but if you want to know what's happening in the market, you do need a way to know which way the money blows.

Comments and questions are invited.​