Just 1.7% of the $128 billion of new money that investment management giant BlackRock attracted in the third quarter went into stock funds — and that’s positive for the U.S. market.
You might be surprised that more money didn’t flow into the company’s stock funds during the third quarter, since the U.S. market was so strong. For example, the Dow Jones Industrial Average DJIA, -0.48% rose 7.6% between July 1 and Sept. 30, and the S&P 500 SPX, -0.55% rose 8.5%. The NASDAQ Composite Index COMP, -0.71% did even better, gaining 11.0%. Wouldn’t a market this strong attract a huge inflow of new cash into stocks?
Surprisingly, no. Since fund flows are a contrarian indicator, outflows — not inflows — are a sign of a healthy market.
Consider the bond market. As you can see from the chart below, 76% of the inflows to BlackRock’s offerings during the third quarter went into the company’s fixed income and cash-management categories.
To be sure, BlackRock is not the entire market, though with $7.4 trillion in assets under management it represents a big chunk. To get a more comprehensive picture of the flow data, I turned to Trimtabs, part of EPFR (a division of Informa Financial Intelligence.) In the third quarter, according to the firm, some