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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts
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To: The Ox who wrote (5428)8/20/2020 7:27:57 PM
From: Sun Tzu1 Recommendation

Recommended By
ajtj99

   of 96653
 
If I may offer an alternate view of the stocks, they should be understood in the context of the money supply, flow of funds, and the fund managers' personal evaluation.

That is the order of importance. Is there more money now than before? Then asset classes in aggregate will go up. No question about it.

Next, is the mix ofthe flow of funds into equities, bonds, or commodities that decides which index will do better. Keep in mind that many funds have charters as to how much cash they may keep or what the mix of the assets may be.

Then, and only then, sector rotation and stock picking comes ito play. But even there a fund manager's options are limited. First of all, the size of the fund and the money flow decides which stock you can buy. The most attractive microcap will make no impact on a huge fund and so the fund manager won't spend time finding it. And then there is the issue of performance evaluation. If the fund is compared to SPX, then the smart thing to do is to buy a big chunk of Spyders plus a few hot stocks to show you are not an index fund.

Viewed this way, you can see that the fund managers don't have to agree with the valuations to buy the hot stocks.
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