BCA Research: Buy High, Sell Low
U.S. Retail Equity Investors: Buy High, Sell Low
12:42:00, October 04, 2007
U.S. mutual fund sales for August showed a remarkably predictable outcome: retail investors fled the equity market as prices corrected.
The same pattern of buying aggressively as prices rose, followed by a rush for the exits after prices headed south, occurred in 2006. Money has resumed flowing back to stocks in recent weeks, as markets have recovered. The powerful rebound in emerging equities will attract an ever-increasing inflow. Investors have soured on housing and bond investments, and will focus on those markets/sectors that are relatively immune to U.S. housing/consumption weakness, and offer a play on the now widely acknowledged economic boom in the developing world. Looking forward, the challenge will be to time when sentiment and valuations have finally overheated to the point where the cyclical risks become unacceptably high. For now, we see no immediate roadblocks, but stay tuned.
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