Myers Capital Management

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The Fund Flows Story

October 12, 2020 by Paul Myers, Myers Capital Management

As COVID 19 hit the world and as a result global economies and markets, investors took risk off the table by selling stocks and putting it into cash/money market.

This selling of stocks makes the market fall further as risk appetite goes away. Please note in the top chart below, which shows where investors money is going, that the same thing happened in 2008. Funds flowed out of US and World stocks and money flew into cash, which in this chart is called liquidity.

Notice that when the economic tide started to turn and the appetite for risk increased in 2009, money came out of liquidity and into the stock market. With interest rates then (and now) almost zero for money market, investors were looking for better returns. It was a multi-year trend with money going out of liquidity and into the stock market in 2009-2011 as the economy healed from recession. And this pushed stocks higher as you see in the bottom right chart.

Why is this significant today? Notice that as of 9/30/2020 more money went out of stocks and more money into liquidity this year than in all of 2008.

As multiple vaccines, which are now in the final phase of clinical trials, are approved and distributed, the economy, which is now growing, will more fully heal at some point. With more money in liquidity today than 2008, stock prices could be once again poised for growth once investors start putting that money at risk again.

When will this happen? This is hard to tell as much has to do with vaccine availability and efficiency as well as the confidence and willingness of people to take them. With elections in less than a month, and COVID being floated as a campaign issue, a stock rebound seems more likely to be pushed off into some time next year. Of course, since we are dealing with a virus that we are still learning about, there is no certainty that this will occur in 2021.

However, the economy will more fully heal, and when it does it is likely we will see an increase in stock prices as investors funds flow from cash into the stock market seeking higher returns.

Filed Under: Myers Cap Post

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Myers Capital Management (“RIA Firm”) is a registered investment adviser located in Abington. Myers Capital Management may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements Myers Capital Management ’s web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Myers Capital Management ’s web site on the Internet should not be construed by any consumer and/or prospective client as Myers Capital Management ’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Myers Capital Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Myers Capital Management , please contact the state securities regulators for those states in which Myers Capital Management maintains a registration filing. A copy of Myers Capital Management ’s current written disclosure statement discussing Myers Capital Management’s business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Myers Capital Management upon written request. Myers Capital Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Myers Capital Management’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.   This website and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, or legal advice. Insurance products and services are offered and sold through Myers Capital Management and individually licensed and appointed insurance agents.   • Copyright Myers Capital Management
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