In January 2023 the Refinitiv Lipper U.S. Fund Flows reported -$4.21 billion out of U.S. mutual funds. February and March piled on with -$14.6 billion and -$23.435 billion, respectively.
The American Association of Individual Investors (AAII) data supports this outflow as their 3/29/2023 report has just 22.5% of survey respondents positive (bullish) on the six-month investment performance outlook. In other words, nearly 80% are neutral or negative (bearish) on the outlook. In fact, 45.6% of Mr. and Mrs. 401(k) are negative (bearish), versus neutral, in their outlook.
As we discuss here from time to time, there are two sides to every transaction. So, if Mr. and Mrs. 401(k) are negative who is so darn positive to be on the other side of the trade? Per Yardini & Associates Research there was $1.197 trillion in corporate stock buybacks in 2022. In 2023 Corporate America is on track to buy back slightly more than $1.197 trillion at the Q12023 buy back pace.
Corporate America is the other side of many of the Mr. and Mrs. 401(k) sells. Corporate America has hundreds of thousands of CPA’s, attorneys and CFO’s crunching the valuation numbers. History has proven they are very astute about when to buy and when to sell. To me, it makes no sense to be on the sell side based on all we know.
That is different from saying “buy” just because Corporate America is. But it does make the case for our strategy of reducing our cash from sells made last January by thoughtfully, intentionally, and purposely adding to our lower risk, lower volatility investment positions as we hit any air pockets offered in 2023.
The first quarter of 2023 has offered some stability of pricing of value versus 2022. “If” these valuation levels can hold past the debt ceiling debate, another rate hike, or two, plus a few likely out of left field wild cards. We will likely shorten the timeline for our re-entry strategy.
I’m interested in your thoughts, comments, and observations. Feel welcome to call, email or stop by the office and say Hi.
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.