Trader’s Narrative

The trend in the fund flows data continues. Investors are shunning the US stock market and embracing the international equity markets.

According to AMG Data: for the month of May 2007, domestic funds reported an outflow of $5.2 billion while non-domestic funds report net inflows of $11.6 billion.

For the month of June 2007, domestic funds report net outflows of $4.2 billion while non-domestic funds report net inflows of $9.3 billion.

The only other market which is even close to as unloved as the US is the Japanese market. Every other market, emerging and developed gets some love (aka capital).

While this dovetails nicely with the other data suggesting the retail investor’s apathy towards the US stock market, in the long run it can’t be good. Typically, a bull market starts out with everyone being skeptical and ends when no one is.

But the market needs the participation of the regular guy. Right now we are seeing the “smart money”, commercials falling over themselves to get long. This is a fantastic vote of confidence in the intermediate to long term. But they can’t sustain the market forever.