OpenMarkets Weekly: Cash Flows

At a Glance

  • Historical patterns exist within stock markets about when capital enters and exits the market. Investors of all kinds should study them.

Over the months of May – October, the stock market has not been good to investors, historically. Returns for that period from 1950 – 2018 on U.S. stock exchanges are 0.3% on average. Conversely, the months of November – April have been very good to investors. Historical returns during those months over the same period stand at 7.5%. Why does this happen? Welcome to the world of cash flows.

On this episode of OpenMarkets Weekly, Jack Bouroudjian takes on the concept of cash flow and what it means to different kinds of investors. Money has patterns of moving in and out of the market at certain times. Though any of these patterns are far from a guarantee, there are historical lessons traders and longer-term investors can take from markets and employ when deciding on the right strategy.

“When we talk about cash flows, know that the fundamentals and seasonality can have a big impact and leave a large footprint,” says Jack.

This extends beyond annual patterns. There are certain times of the month and even certain times of each trading day where capital tends to enter or exit the market more often. Jack explains the fundamental reasons behind these patterns, and how studying them can help anyone understand equity markets a little better.

Watch the full episode above.

OpenMarkets is an online magazine and blog focused on global markets and economic trends. It combines feature articles, news briefs and videos with contributions from leaders in business, finance, economics and politics in an interactive forum designed to foster conversation around the issues and ideas shaping our industry.

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