Signs of the Bottom?

Is the market showing signs that it is bottoming? Let's take a closer look at the following interesting statistics:

The staggering balances in money market funds- The amount in money market funds (cash) has increased by almost 71% over the last two years. *Source: Investment Company Institute

Pimco Total Return (a bond fund) was the hottest selling mutual fund- The fund had net inflows of $14 billion just in the first six months of 2008.

9 out of the last 11 quarters had outflows of stock mutual funds- This means more people sold stock mutual funds than purchased stock mutual funds. Investors typically buy high and sell low. People typically give up on their stock investments when the “news” looks bad and that has historically been at the bottom.

The American Association of Individual Investors survey of bullish to bearish difference was more than 29 for the first time in years- In fact, only 13 times out of 1,040 times were investors this pessimistic. Average returns for the five years after each of these last 13 times were 81.3% for large cap stocks and 123.3% for small cap stocks. *Source: Al Frank and Morningstar

Investors Intelligence Sentiment Indicator hit a 14 year low- Subsequent average 12 month returns for similar readings were 15.82%. *Source: Dr. Jeremy Siegel “Stocks for the Long Run”

Be assured that all of this proves nothing-except that the mob is shunning equities as it rarely does and flocking to cash and bonds. The more (and the longer) it does so, the more bullish you should become.