Tags: Yardeni | great | rotation | stock

Yardeni: 'Great Rotation' Will Fuel Stock Market Surge

Friday, 13 Dec 2013 01:21 PM

By Dan Weil

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It looks like investors are finally making the long-predicted leap into stocks from bonds, says Edward Yardeni, president of Yardeni Research.

"The stock market may be ready for the Great Rotation from bonds into stocks," he writes in a market commentary obtained by Moneynews. "There is already a Good Rotation underway."

That's evidenced by the fact that in the year through October, stock mutual funds saw an inflow of $162 billion, their best year since December 2007, and equity exchange-traded funds (ETFs) garnered a record $181 billion.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

Meanwhile, the 12-month stream into bond mutual funds and ETFs dropped to $99 billion as of October from $457 billion as of November 2012.

One caveat Yardeni notes is that "there may be too many bulls." The idea is that everyone who wants stocks already has bought them, and only the bears are left waiting in the wings.

But, "for now, all those bulls are pouring lots of cash into the stock market," Yardeni writes. "There may be some bad news lurking out there, but right now it sure seems like we have nothing to fear but nothing to fear. . . . It's starting to look a lot like a Santa Claus melt-up.

"My number one worry . . . is all the bulls-come-lately, who are just now turning bullish, are underinvested in stocks," he explains. "Many of them had been bears for the past five years because they worried a lot about another financial meltdown causing another global recession. They don't seem to be worrying anymore."

Meanwhile, Russ Koesterich, chief investment strategist at BlackRock, says there are plenty of reasons to be worried about the stock market's rampant rise, but there aren't any better alternatives.

"If someone asked me, how would I describe my position going into 2014, I'd say that I'm a nervous long," he tells CNBC.

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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