The basis for all the new highs is:
Investors who yearn
For a better return
Than the interest-rate outlook advises.
The billions investors have shifted
To stock funds effectively lifted
The market's appeal
(And also, the deal
That avoided the big Fiscal Cliff did.)
There's a saying that's really akin to it,
From traders who've commonly been to it:
On the stock market floor,
According to lore,
You get out of it what you put into it.
I guess by now almost everybody is aware that we are in a bull market for US stocks, and one would expect a surge of small investor interest to follow this realization. However, according to the Wall Street Journal, a massive inflow of retail cash into equity mutual funds also preceded and contributed to the market surge. On Tuesday, the Dow Jones Industrial Average rose 72 points to close at 13,954, its highest level since October 2007. The Dow has risen 850 points - or 6.5% - in January, a New Year's achievement not seen since 1989. As shown by the graphic, this strong performance was helped by $6.8 billion of investor cash flowing into equity funds in the first three weeks of the year, after years of massive outflows. No doubt some of the recent inflow manifests the public's relief that the federal government did not take the economy over the Fiscal Cliff in January, and is thus a rebound from the fearful, exaggerated December outflow. However, in the market, optimism may create its own reward by boosting demand for assets (stocks) and hence, their prices; proving, once again, that you get out of life what you put into it.