The Unknowns Can Derail Past Conclusions

An important factor associated with writing blog content is it serves as a written record of one's thinking at certain points in time. It is often beneficial to go back and review one's thoughts and conclusions at these various points in time. If the conclusions that are drawn from one's writings turn out to be different than what was expected, understanding why is important going forward.

I was curious about some of the conclusions in the blog in September last year as the market was reaching new highs. Knowing that stocks do not know what day or month it is during calendar years, seasonality plays a role in market return due to investors' influence in the market. With this noted, August and September tend to be volatile down market periods and I sometimes write about this seasonality at this time of the year. As fate would have it, I did not write about the seasonality in 2018.

What was noted in my last post in September 2018 was the fact investment flows into bond and equity funds and ETF's had increased. Specifically, equity flows turned positive in the next to last week of September after being negative in the four prior weeks. Today, for the week ending September 18, Lipper reports, "All asset groups were on the plus side for the week, paced by equity funds (+$6.0 billion) and followed closely by money market funds (+$5.4 billion) and taxable bond funds (+$4.1 billion). Municipal bond funds extended their streak of consecutive net inflows to 37 weeks as the group had net positive flows of $209 million." ICI reports flows as well, but with a one week lag. Their reporting is showing similar flow data for the week ending September 11.

Also in the post from last year I commented on the fact individual investor sentiment seemed more balanced/neutral with bullish sentiment at that time equaling 36.2%. Today bullish sentiment is nearly the same at 35.3%. However, the eight-period moving average of the bullish sentiment is much less bullish today at 28.1% versus the 37.3% last year at this time. As a contrarian indicator, the low level of bullishness today would be a bullish signal for stocks.

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