Great Rotation? (Excerpt)

The jump in Lipper’s weekly equity mutual funds inflows since the start of the year has sparked some chatter about a "great rotation" out of bonds and into stocks.

January is historically a strong month for inflows as investors make their annual contributions to IRAs and year-end bonuses are invested. This year there was a bulge in such funds as more bonuses and dividends were paid out before the "fiscal cliff" tax hikes expected at the start of 2013. Let's have a closer look at the data:

(1) Wages and salaries in personal income popped by 0.6% during December. Odds are this number will be revised upwards given that individual income tax receipts collected by the US Treasury jumped 19.8% y/y (the most since October 2011), with the 12-month average up 1.9% m/m.

(2) Dividends in personal income spiked from $782 billion (saar) during November to $1.1 trillion during December. Data available through December show that reinvested dividends in equity mutual funds rose to a record $77.0 billion last year, with a record $46.6 billion during December alone.

Today's Morning Briefing: The Future Is Back. (1) Paradise lost and found. (2) The future is making a comeback. (3) Corporate flows feeding the bulls. (4) The Great Rotation? (5) The fiscal cliff turned out to be bullish. (6) Yearend bulge in bonuses and dividends. (7) The January Barometer. (8) Three major positive trends for the future. (More for subscribers.)