Investors Missing Third Strongest Bull Ever

Since the bear market bottom in March 2009, the S&P 500 is up almost 60 percent over the last 15 months. This is biggest gain of any of the seven bull markets that lasted that long since 1962, according to Birinyi Associates. Too bad everyone’s missing it.

Data from the Investment Company Institute released yesterday showed that investors yanked money from equity funds for a fourth straight month, pulling $16.5 billion out in August. Figures for the year, show a net withdrawal of $18 billion from equity funds.

What amazes the folks at Birinyi, who have been bullish along this ride, is that these four months of outflows came after an eye-popping year-over-year change in the market in March. On the one-year, bear-market bottom anniversary of March 9, 2010, the S&P 500’s gain for the previous 12 months was almost 70 percent. That figure, which Birinyi says is the third-biggest 12-month change in stock market history, failed to instill investor confidence for the second and third quarters. In the past, such strong gains in the stock market usually trigger inflows.

"This is the third best year over year gain in the market’s history, but it doesn’t count as a bull market?" ask the analysts for Birinyi, founded by legendary Salomon Brothers trader Laszlo Birinyi. "Looks good to us."

The ghosts of Septembers past may have kept investors away in August. Traditionally the worst month of the year, the S&P 500 posted an 8 percent gain this month. It hasn’t had that bright of a September since way back in 1939.

Bond funds saw another $31 billion inflows in August, bringing their 2010 total intake to over $200 billion, according to ICI.

"The money flowing into bond funds shows me that people have not disappeared and are still taking charge of their money," said J.J. Kinahan, chief derivatives strategist for TD Ameritrade. "They’ve just been scared out of the stock market so they will return in a slower fashion than they have in the past."

Kinahan said they are seeing people leave the full-service brokers and come to more self-directed shops like TD Ameritrade. This transition is adding to the lag in participation of individuals as they get more educated on managing their money and shake off the memories of the lost decade. But both Kinahan and Birinyi say they eventually will come back.

"At some point," stated the Birinyi monthly newsletter to clients, "individuals are going to realize that for all its pitfalls, the alternatives aren’t that exciting and are ultimately not rewarding."

For the best market insight, catch ‘Fast Money’ each night at 5pm ET and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC. 

John Melloy is the Executive Producer of Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team

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