The major averages are up anywhere from 6% to 9% on the year, and it looks as if the allure of rising prices is bringing retail investors back into the stock market, says Cort Gwon, director of trading strategies and research at FBN Securities.
True, the Dow Jones Industrial Average ($INDU) has tacked on nearly 400 points over the past two weeks, thanks in part to solid quarterly earnings reports and anticipation of more stimulus from the Federal Reserve. But another boost for equities is coming from retail investors who've tentatively started moving money from bond funds back into stock funds, Gwon says.
The reason for this sudden shift in fund flows? Retail investors are getting their statements in the mail for the quarter ended Sept. 30 and seeing that stocks are up -- while bonds are yielding next to nothing in a zero-interest rate environment, Gwon says.
"In the past couple of weeks you've seen a shift from flows to fixed income back into stocks," says Gwon. "A couple of weeks ago, we had $2 billion of inflows into fixed income. Last week it was only $300 million. That money is now going into the stock market."
For more on Gwon's take from the floor of the New York Stock Exchange (NYX), see the video above.