So we are back at new highs on the Dow and the SPX is right where it was back in ’00 and ’07. There are lots of ways to measure ‘this time vs. that time’ – here’s my favorite.
Mutual fund inflows and outflows are a nice way to gauge what the public thinks. Sure, this isn’t perfect with the rise in ETF trading – still, it can give some type of picture as to what investors are thinking.
Turning to data from the ICI, domestic equity mutual funds are a great way to measure what most investors still think of stocks here. Remember, markets peak at euphoria and I simply don’t see it here. This can change quickly, but right now it looks safe to say the longer-term bullish trend is alive and well.
Back in ’00, they couldn’t get enough of stocks and domestic mutual funds. That was a bad time to be in stocks. Then in ’07 they started to be net sellers, again not a great time to be in stocks. Well, take a look at now. Most of your average investors want nothing to do with stocks here. In fact, they’ve been net sellers of domestic mutual funds for going on five years!
Is this time different? Or will we create the dreaded ‘triple top’ on the SPX? If I had to show one chart that said this time is indeed different and we’ll finally breakout, I think this one sums it up.