Tags: Stock | Mutual | Funds | Cash

Stock Mutual Funds' Low Cash May Mean Bull Market Over

By Dan Weil   |   Monday, 15 Mar 2010 08:51 AM

Stock mutual funds are eating up cash at the quickest pace in 18 years, putting their cash reserves at the lowest level since 2007.

That development could mean the bull market in stocks is coming to an end.

“It’s not a red light, but it’s a flashing yellow light that the strongest part of the rally is probably over,” Jerome Dodson, president of money managers Parnassus, told Bloomberg. “There’s not as much buying power out there.”

To be sure, he still think the Standard & Poor’s 500 Index will gain between 6 percent and 9 percent this year.

Cash reserves at equity mutual funds slid to 3.6 percent of assets in January from 5.7 percent in January 2009, the quickest decrease since 1991, according to Investment Company Institute data.

That leaves the funds with $172 billion that they can use for new investments. The last time stock funds had such a small proportion of their assets in cash was September 2007, a month before the S&P 500 began a 57 percent drop, according to Bloomberg data.

Of course the situation could change in a hurry. Mark Bronzo of Security Global Investors tells Bloomberg that talk of higher interest rates will lure cash to stocks from bonds.

CNBC’s Jim Cramer remains bullish on stocks too. “I want to be bearish on all this news,” he said on the air. “Then all the sudden the facts get in the way.”



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Stock mutual funds are eating up cash at the quickest pace in 18 years, putting their cash reserves at the lowest level since 2007. That development could mean the bull market in stocks is coming to an end. It s not a red light, but it s a flashing yellow light that the...
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