Chasing Returns as Asset Allovcation....Late to the Party ?

As is almost always the tendency of retail investors their footprint is seen in chasing top performing assets. This was clearly the case in November. Index Universe reviews the flows in November. Money flowed to (surprise !) emerging markets and small cap stocks in November quite late to the party after these asset classes are closing out a year strongly outperforming the broad based stock and bond indices.

As I have mentioned there is a strong tendency for such flows to continue at year end and the beginning of the new year. After that it is anyone's guess but the large flows of funds into the market that is late to the party leaves the market vulnerable to a sharp selloff should these asset classes start to fall.

Looking at the ytd  relative performance of the funds with the major inflows vs the sp 500, total us stock market (vti) and aggregate bond index (AGG) it's pretty clear the flows chased performance

Here is the table with dollar inflows in millions.:

VWO

Vanguard Emerging Markets

Vanguard

1,734.80

VO

Vanguard Mid-Cap

Vanguard

1,322.14

IWM

iShares Russell 2000

BlackRock

1,201.37

VB

Vanguard Small-Cap

Vanguard

833.40

IWD

iShares Russell 1000 Value

BlackRock

669.54

SLV

iShares Silver

BlackRock

567.84

VBR

Vanguard Small-Cap Value

Vanguard

494.27

VBK

Vanguard Small-Cap Growth

Vanguard

484.19

FAS

Direxion Daily Financial Bull 3x

Direxion

404.85

MINT

PIMCO Enhanced Short Maturity Strategy

PIMCO

403.29