Another week goes buy (pun intended). Or should I say sell according to the charts?
Attached is the Lipper Charts from Barrons regarding mutual fund flows for the latest week. It was an interesting week. Although the stock market climbed, equity and taxable bond funds continued to have significant net outflows.
Keep in mind that the charts represent the net cash flows for four week moving averages. So significant movements are buffered by averaging.
Equity mutual funds are showing a slowing exodus. It looks like an inflection point. The net outflow is still negative but slowing down. It is good to keep in mind that the latest data point is the average of the latest four weeks.
Bond mutual funds are still moving deeper into net outflows. Are investors nervous about interest rates and running away?
In my view Wall Street pays way too much attention to the Fed Chairman. Every little word he says is dissected and second guessed. I bet Powell wishes is wife listened to him like Wall Street does, but for anyone married for a long time, that is just wishful thinking!
Powell is clearly taking a measured approach like all Fed Chairmen have done. By selling their bonds and slowly raising interest rates, he is "loading the gun" so to say. Being reloaded will give the fed the tools to be ready to deal with the next future downturn. Like the civil war, you want to be reloaded before the next wave comes at you. If your gun isn’t loaded in time, you will have no chance when the next wave comes.
With the massive debt the federal government is burdening us with, he is very much going to need the tools of open market operations and discount rate adjustments. You can't push an economy loaded with debt up a hill with a string! The hell with Wall Street. They flap their gums like the politicians in Washington. The Fed is doing the right thing and, like always, it is being done in a measured way. Wall Street just likes to fill the air with talk like an excited teenager.
Muni funds are actually net gainers of funds. The flow into muni bond funds is a conundrum to me. Finally, the flow into money market mutual funds is slowing.
