The Markets Have Entered a Blow Off Top
by Phoenix Capital Research
The markets are entering a blow off top.
For five years, by keeping interest rates near zero, the Fed has been hoping to push investors into the stock market. The hope here was that as stock prices rose, investors would feel wealthier (the “wealth effect”) and would be more inclined to start spending more, thereby jump-starting the economy.
This has not been the case.
From 2007-early 2013, individual investors fled stocks for the perceived safety (and more consistent returns) of bonds. During that time, investors have pulled over $405 billion out of stock based mutual funds.
The pace did not slow throughout this period either with investors pulling $90 billion out of stock based mutual funds in 2012: the largest withdrawal since 2008.
In contrast, over the same time period, investors put over $1.14 trillion into bond funds. They brought in $317 billion in 2012, the most since 20008.