FOMO Turns Into Flow Mo’

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss how the fear of missing out has impacted the flows of funds into equity mutual funds.

Posted 4/26/21 

TRANSCRIPT:

Tony:

Welcome to this edition of Chart Talk.  I’m Tony Ogorek, I’m here with Jeff Viksjo today.  And we are going to be looking at FOMO, Fear Of Missing Out, and how that has impacted flows of funds into equity mutual funds.  And Jeff, we’ve got a chart here going back from 2013 all the way through St. Patrick’s Day of this year, and it shows the money that goes in and out of stock mutual funds.  Tells an interesting story, don’t you think?

Jeff:

It does.  We see that huge spike on the right, that’s $54 billion flowing into equity funds. That’s the highest weekly total, as long as this chart goes back to 2013, as you said.  So, you have to ask, where is that money coming from? You know, simultaneously, we have this big surge into stocks, we saw all the flow into bonds, and it basically flows out of money market accounts, which have been strong and all of a sudden that’s where all the money came from.

Tony:

The interesting thing is, the Fed was raising rates into 2018, stocks didn’t like that, and what you’ll notice is there was a lot of money going into bonds.  Well the Fed did turn and ended up dropping rates in 2019, the market went up about 30%.  The interesting thing is people continued, even though the market was going up very strongly, they continued to pull more money out of stocks then they put in.  And now, it’s interesting that we’ve got hardly any money being pulled and seems like everyone is in.  What might that portend for the future, Jeff?

Jeff:

I think part of it is FOMO, Fear Of Missing Out, but I think it’s also TINA, There Is No Alternative.  It wasn’t just low rates, we’ve had low rates for a while, to push people into stocks.  It was the fact that rates have now bounced up off of those bottoms.  And so when it rises, rates go up, you get losses in your bond portfolio.  And investors are sitting there seeing losses, seeing red in their bond portfolio, and I think that’s what caused them to get into stocks.

Tony:

Interesting.  So, we’re going to have to see what the future holds for us.  But the interesting point is, a lot of money is going into stocks and that probably is going to be propelling the market forward in the near future.

Thank you for joining us in this edition of Chart Talk.  We look forward to seeing you soon.

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Comments:

Sister Emily Bloom April 26 2021

Thank you for the explanation. And thank you for assisting people to help them make decisions where and how their money is being invested. Ogorek Wealth Management does this very well!