Earnings, not wholesale ‘buying’ have been driving the recent rally….please read my previous comments . Those arguing that the “Olympic” rally is a false start have simply missed the boat yet again.  They suggest the stock market is overbought but who’s actually bought it?  The hedge funds have been doing squat with their money of late, and the rest?  I’m sure the U.S. investor is behaving no different than our Canadian folks:

“The Canadian mutual fund industry reported decent net flows into long-term funds of $984 million in June, and total net sales, including money market funds, of $800 million.”

Yes, there is money being put into savings and securities, but NOT the stock market.  For a very long time now retail investors (and you can bet institutional investors have been doing likewise) have been focussed on the fixed income markets.  Yes balanced funds have received some flows but it’s the bond portion they want, and the equities just happen to be there.

“Bond funds were the top-selling funds in the month, reporting net inflows of $928 million. Balanced funds also experienced decent net flows of $670 million; however, flows are down significantly from net sales of $1.9 billion in the same month last year.”

Stocks are overbought they say?

Despite the improvement in equity markets in the month, equity funds experienced net redemptions of $911 million. We are not expecting a turnaround in equity fund flows in the near term.

Now that we’ve had continued strength in equities, you can be sure that there “will be” a turnaround in the really NEAR term.  The chickens will cross the road, and the last ones to do it will be runover.