Individuals back in stocks

Individual investors are coming back into the stock market. From Bloomberg today:

Individual investors are plowing money back into the U.S. stock market just as professional strategists say gains for this year are over. About $100 billion has been added to equity mutual funds and exchange-traded funds in the past year, 10 times more than the previous 12 months, according to data compiled by Bloomberg and the Investment Company Institute.

The growing optimism contrasts with forecasters from UBS AG to HSBC Holdings Plc, who say the stock market will be stagnant with valuations at a four-year high. While the strategists have a mixed record of being right, history shows the bull market has already lasted longer than average and individuals tend to pile in at the end of the rally.

“If Wall Street, after poring over all known data, comes up with a target and we’re already there, and you still see individual investors buying and they’re typically the ones that are late to the party, it would seem there is limited upside,” Terry Morris, a senior equity manager who helps oversee about $2.8 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said in a July 8 phone interview.

It may be late in the party but some fund managers still see gains to come.

For Laszlo Birinyi of Birinyi Associates Inc., stocks have entered what he calls the exuberance phase, the last of four stages usually seen in bull markets. He still sees more gains to come, citing the skepticism on Wall Street as a sign that plenty of investors haven’t bought shares yet...

The bull market...is closer to the end than the beginning, said Walter Todd...chief investment officer at Greenwood Capital Associates LLC...

“To the extent that investors start to put a lot of money into the market, it would certainly be late,” Todd said in a July 9 phone interview from Greenwood, South Carolina. “But to say that the end is going to happen in the next few months, I don’t agree with that.”