Trader Talk

2009: One Very Strange Year

2009 ending at the highs for the year, the close to a VERY strange year.

Don't get me wrong: with the S&P 500 up 23 percent for the year, it has been a very good year...the best return, in fact, since 2003, when the S&P was up 26 percent.

But the gains have come despite statistics that are less than market friendly. According to, this year has seen:

1) OUTFLOWS from U.S. stock funds all year;

2) a RECORD AMOUNT ($311 billion) of new stock offerings (includes IPOs, secondaries, and converts, but particularly a large offering of secondaries in the second half of the year);

3) Announced cash M&A, as well as corporate stock buybacks, AT THE LOWEST LEVELS FOR ANY YEAR THIS DECADE.

These are strange statistics, all of which would argue AGAINST a big move up in stocks. But the weak dollar and record low rates which stimulated a hunt for riskier assets overcame all of those negatives in 2009.

More on fund flows. What a weird year! Look at these 2009 stats, again courtesy of

  • U.S. stock funds: $32 billion OUTFLOWs
  • U.S. ETFs: $18 billion OUTFLOWS
  • (there's about $3.6 trillion in U.S. stock mutual funds)
  • International stock funds: $26 billion INFLOWS
  • International ETFs: $35 billion INFLOWS
  • (there's about $1 trillion in international mutual funds)
  • U.S. bond funds: $370 billion INFLOWS
  • U.S. bond ETFs: $39 billion INFLOWS
  • (there's about $2 trillion in U.S. bond funds)
  • Commodity ETFs: $27 billion INFLOWS (now $48 billion invested in 98 ETFs)

What do we make of this? That the U.S. investor, on net, put NO MONEY into U.S. mutual funds this year, put a small amount into international funds (mostly emerging market funds), and put A TON OF MONEY into bond funds, apparently under the theory that: 1) stocks can't be trusted, and 2) bond funds do not go down.

This is setting up for a potential disaster for investors, many of whom pulled their money OUT of stocks from November, 2008 on and put them all in bond funds.



Questions?  Comments?