Investors hopeful for cash flow

NEW YORK – Is there a reservoir of cash waiting to gush into the stock market?

If so, it could only help stocks, which rise with cash flows, as we saw in the go-go 1990’s. “You can’t have go-go without flow-flow,” said Edward Yardeni, chief investment strategist at Oak Associates. “It’s always easy money that creates the speculative excesses in global booms.”

Equity investors aren’t looking for a boom – they’re looking for any gains, since major indexes are almost flat for the year. That’s why one of the big questions of the day is whether there’s enough cash on the sidelines to do the job.

The indicators are mixed. Some positive signs: Housing is too expensive for even some speculators, private equity funds are bloated with cash and corporations are briskly buying their own stock. But there are negatives, too: Corporations may have less cash on their balance sheets than we think and the percentage of U.S. equity funds kept in cash is low.

The lackluster return in the stock market over the last five years has caused investors to move to other asset classes in search of high returns, said Mitch Zacks, portfolio manager at Zacks Investment Management. “If those returns don’t materialize, relative to the risk that’s being borne, assets will return to equities,” he said.