Watching Money Flow

Next week is Valentine's Day so make sure you take care of your Valentine.

Vanguard Weekly Recap

In a light week for economic news, the U.S. trade deficit increased and U.S. consumer borrowing rose. The trend of fewer people applying for jobless benefits continued, a sign that hiring is picking up. For the week ended February 10, the S&P 500 Index declined 0.2% to 1,343 (for a year-to-date total return—including price change plus dividends—of about +7.0%). The yield on the 10-year U.S. Treasury note fell 1 basis point to 1.96% (for a year-to-date increase of 7 basis points).


Watching Money Flow

Last week I reported on something that I follow called the ARMS index. Another thing that I follow is the money flow in and out of mutual funds. I find this information each week in Barron's.

Equity Funds averaged $5.4 Billion inflow of money over a 4 week period. Money Market Funds averaged $11.5 Billion outflow of money over a 4 week period. Municipal Bond Funds averaged $1.2 Billion inflow of money over a 4 week period. Taxable Bond Funds averaged $7.7 Billion inflow of money over a 4 week period. So for the last month money has been leaving money market funds and ha3 been put to work buying stocks and bonds, driving the stock market indexes higher.

When we look at the change from the previous 4 week average we get a feel for momentum. Last week the Equity Funds had a huge swing from -$1.0 Billion to $5.4 Billion while Taxable Bond Funds had a big swing from $5.0 Billion inflow to $7.7 Billion inflow. Money Market Funds and Municipal Bond Funds were relatively flat.

So last week, we had a huge increase in money going into Equity Funds while the US Stock Indexes went down slightly, interesting. The drop on Friday was about 0.7%, not much compared to the drops we saw last year. A huge increase in money going into Equity Funds and the US Stock Indexes not going up indicates that the US Stock Indexes have hit a short-term resistance. If the increase in money going into Equity Funds continues this indicates that US Stock Indexes will continue to go up. It should be an interesting year to watch the money flow.


2011 Valentine's Day Spending

According to a National Retail Federation survey of nearly 9,000 consumers, shoppers will spend an average of $116.21 on traditional Valentine’s Day merchandise, such as greeting cards, flowers and candy, this year, up 11% from $103.00 in 2010. 18.1% of consumers say they’ll include online retailers among the venues they’ll shop.

A separate survey of 1,200 online consumers from eBillme, an Internet payment service vendor, and conducted by Javelin Strategy & Research, is more bullish about the web’s role in Valentine’s Day gift-shopping. It says 32% of consumers plan to do their Valentine’s Day shopping online, up from 23% last year.

Jewelry sales are expected to climb, as 17.3% of consumers say they’ll buy jewelry as a Valentine’s Day gift this year, up from 15.5% last year, according to the NRF survey. The NRF says consumer spending on jewelry is expected to reach $3.5 billion, up from $3.0 billion in 2010. Apparel sales also are expected to increase slightly.