Читать книгу Unloved Bull Markets - Craig Callahan - Страница 13

Along with many other observers, Tom Keene of Bloomberg Surveillance Radio called the multiyear bull market, from March 2009 to February 2020, “unloved.” We agree and believe that, for a variety of reasons, many investors chose not to participate in the market and missed out on a terrific opportunity to increase wealth. In previous bull markets, investors gained confidence and faith as the market advanced. Not this one. Unlike in previous bull markets, investors neither gained confidence nor faith in the workings of the market. If anything, the advance only encouraged the opposite: skepticism and doubt.

The Investment Company Institute (ICI) reports mutual fund data in its annual Investment Company Fact Book regarding annual inflows, outflows, and net flows for equity mutual funds beginning in 1984. Figure 1.1 shows annual net flows, which is inflows (sales) minus outflows (redemptions) in millions of dollars in gray scaled on the right. The S&P 500 Index is in black with quarterly observations scaled on the left.

Although the bull market in the early 1980s began in August 1982, equity fund flow data begin in 1984. Nevertheless, we see increasing positive flows in 1984, 1985, 1986, and 1987 as the S&P 500 moved higher. The market advance attracted investors, as they apparently gained confidence. There were net outflows in 1988 as investors moved away from equities after the market crash of October 1987. As it happens investors were captivated by the crash in their rearview mirrors and couldn't bear to face the bull market ahead.

Figure 1.1 Equity Fund Net Flows and S&P 500 Index, 1984–2019

As the next bull market started, equity mutual fund net flows turned positive and grew accordingly with the market advance. The graph shows how the rising market enticed investors to buy equity mutual funds. In the end of that bull market, net flows hit their peak concurrent with the high of the S&P 500 Index. During the market decline following the “tech bubble” of early 2000, investors greatly reduced their investing into equity mutual funds. As the market advanced off the September 2002 low, investors sent net positive flows into equity mutual funds, not to the extent seen in the late 1990s but still enough to reflect confidence and optimism for equities.

Compared to the previous bull markets post 1987 and 2002, what makes this recent bull market “unloved”? The surge off the market low in early 2009 barely got net flows positive, but 2010, 2011, and 2012 saw a race for the exits even though the market moved higher. Unable to see the multiyear bull market ahead of them, the only emotions investors were capable of was simply, “Get me out of here!” Only one year, 2013, saw significant net positive flows, but after that brief period of confidence in equities, investors reverted to a negative view, especially in 2016, 2017, and 2018. These net redemptions were clearly early as the S&P 500 hit an all-time high February 2020 and those who redeemed along the way did not participate.

Outflows continued as the market moved higher in 2019, as reported in the Wall Street Journal December 9, 2019, in a front page article with the title “Individual Investors Bail on Stocks.” “The S&P 500 is having its best run in six years, but individual investors are fleeing stock funds at the fastest pace in decades.” It continued, “Investors have pulled $135.5 billion from U.S. stock-focused mutual funds and exchange traded funds so far this year, the biggest withdrawals on record, according to data provider Refinitiv Lipper, which tracked the data going back to 1992.”

Table 1.1 shows the average annual net flows into equity mutual funds for four bull markets. It was positive for the previous three bull markets but negative for the most recent one. The market was moving higher but investors were fleeing equities, unusual, but explained by investor sentiment in the next section.

Table 1.1 Average Annual Net Flows (in $ Millions)

1984–1987	12,649
1988–1999	106,520
2003–2007	132,040
2009–2019	−112,279