Earlier this week, the Financial Times asked, “The death of equities?“
Historically, these types of proclamations are screaming buy signals.
Barron’s columnist Michael Santoli opines on the matter, saying the observation is late and the conclusions that come from these calls are often fallacious. From this week’s print edition:
While all of the attention on individuals’ virtual boycott of stock investing is logical, the discussion tends to produce faulty conclusions. Specifically, that this phenomenon is somehow news, that it is poised to reverse soon, and that it is somehow central to the market’s performance prospects.
It’s a stale observation by now that Main Street prefers bonds. Something like a net $1.4 trillion swing in money flow from stock to bond mutual funds began in 2007, not last month. The notion that such a preference is likely to reverse before long, simply because it’s gone this far for this long, is sketchy. This is the common but untrustworthy “cash from the sidelines” reasoning.
One of the most popular calls by both bulls and bears these days is that the stock market needs cash inflows and more volume to rise. However, Santoli notes that this argument is just so obviously wrong.
Finally, both optimistic and downbeat commentators wrongly use the public’s wariness toward stocks as support for their market outlook.
Bears, who claim broad investment flows are needed to hold up stocks, should note that the U.S. market just doubled in three years with retail selling into the move.
Like Santoli says, “Eulogies for stock investors are premature.”