The Joe SixPacks of the investment world have been re-entering the market since March 9th.  This was after they initiated a pretty sizable outflow of mutual funds during January and February.   However, the Joes may be slowing their rate of equity inflow for some reason.

The charts below provide this year’s data.  The data source (e.g., http://www.ici.org/ ) lags by about a week, thus, we have to wait to confirm some possible developing trends.

Figure 1 above shows the weekly closing prices of VTI, the total market ETF.  This is the pattern we are all familiar with in terms of equity price increase from March 9th.

Figure 2 above shows inflow/outflow to domestic and foreign equity mutual funds.  Note the outflow from January to late February, and the resulting increase in inflow from early March to present.  Note also that in terms of cumulative balance for 2009 the equity funds are still “underwater”, that is, they need to exceed the “breakeven” line to begin a positive balance in the funds for 2009.

Is there are correlation between VTI data and mutual fund inflow/outflow?  Yes.   However, I don’t want to spend time mulling over those statistics because (1) correlations cannot be used to infer causality, and (2) the charts are presented only to visualize a potential trend in the direction of money flow.

What I want to outline in this post is the fact that the slope of  Joes’ inflow has changed, and it is decreasing (Fig 2).  This is interesting when we look at the pattern of inflows and outflows from money market mutual funds.  Basically, we see that while money has continued to move out of money markets at a fairly steady rate, something has happened to the rate of inflow into equity funds (cf. Fig 2).

I’ll be watching this possible trending action closely in the next few and post any new  developments that might present themselves.  The inflection in equity prices during mid-2003 was marked by many events, one of which was a transition in money flow from money market funds to  equity mutual funds .  We hear a lot about so-called “side-lined money” from the media (no, I will not mention DK in this post), and  mutual funds account for at least one source of the side-lined money.  Thus, if there is a change in the direction of mutual fund flow it most likely will have significance for the broader equity market.