With Fed tapering not coming any time soon and the budget battle can kicked down the road for the next couple of months, stocks are near record highs. But in this environment, where are investors putting their money?
Charles Biderman, founder and chairman of TrimTabs Investment Research, has compiled some interesting data on fund flows. And, according to Biderman, the last week has seen a lot of money move into equities.
"A huge amount went in [to equities] starting on Thursday when it became apparent that there would be a deal," says Biderman. "It was actually a whopping $17 billion went into US equity mutual funds and exchange traded funds [ETFs] combined. That's a huge amount of money."
Bonds also saw an inflow of $2 billion in the past week as it became apparent the Federal Reserve Bank wasn't going to taper its $85 billion monthly bond-buying operation known as "quantitative easing" ("QE"). The Fed was expected to taper this stimulus policy in September but decided to keep it steady when economic data showed lackluster growth.
"While that means there won't be a taper any time soon, that means the Fed's going to keep buying financial assets with newly created money," says Biderman. "Whenever the Fed's printing money, the market's goes up [but] when the Fed stops printing money, the market has gone down over the last four years."
But while other asset classes have seen a relatively large influx of funds, one class has shown only a modest uptick: precious metals such as gold and silver. Since last week, $630 million have gone into precious metals, less than 3% the amount that went into equities worldwide.
"While every other asset class seemed to get new money over the last three days, the only exception has been gold," says Biderman. "I'm not sure exactly why."
To see the rest of Biderman's interview on where investors have been putting their money in the last week, watch the video above.
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