It's not exactly "Stop-the-Presses!" news anymore, but the Dow hit a fresh
record intra-day high on Wall Street yet again Wednesday before the rally
fizzled. The market's run raises the question: Where will the buyers come from
to drive stock prices even higher?
"Taking a look at who's buying and who's selling can tell us something about the durability of the ... market's performance and what may lie ahead," Jeffrey Kleintop, chief market strategist at LPL Financial said in a research note.
The big buyers of stocks, he says, have been U.S. corporations buying back their own shares and foreigners snapping up shares here rather than in their own countries. Demand from individuals and hedge funds has been mixed. Pension funds and corporate insiders have been net sellers.
Risks to the rally, Kleintop says, would occur if large U.S. companies, which have been among the most aggressive buyers, dialed back on their purchases as stocks trade around record highs. Similarly, while foreigners' net purchases of U.S. stocks quadrupled in 2012 vs. 2011, the pace of buying this year is off to its slowest since 2004, U.S. Treasury data show.
It would be bullish if individual investors and pension funds increase their buying, he adds. Pension funds have 53% of their cash in stocks, vs. a peak of 70% before the financial crisis. Mom-and-pop investors were sellers from 2008 through 2012. "The potential for money to flow into the stock market and lift stocks is significant," says Kleintop.
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