NEW YORK (CNN/Money) - It's quiet now, but in just a week's time a wave of cash is going to be bearing down on Wall Street.
January is typically the biggest month for inflows into equity funds, and with the market's bounce in 2003, Jan. 2004 could be especially big. As year-end bonuses (some people are actually getting them) come in, and as workers plan 401(k) allocations, investors are going to be shifting money toward stocks. Adding fuel to the fire, the 2003 tax cuts will add $40 billion to households' disposable income in the first half of 2004.
Like the ads say, past performance is no guarantee of future returns -- but it's a good predictor of where people are going to put their money. Funds that have done particularly well, like techs, aggressive growth and overseas, will get an outsized share of the cash. Bond funds will attract far less, and mutual fund and hedge fund managers who have bet the wrong way on the market could be in trouble.
Most managers will be quick to put that money to work, according to Reed, Conner & Birdwell chief investment officer Jeff Bronchick, because with the market's good performance "there's less latitude to hold cash."
Nevertheless, Bronchick, who was happy to buy beaten down stocks a year ago when worry levels were high, is going into the new year with a heavy cash position because he is finding fewer bargains.
"We have to do what we have to do to resist pressure from clients or the market to participate," he said.
Bronchick is in a rare position, however. Most managers are mandated by their fund companies to keep cash levels low -- particularly if that's what investors are clamoring for. As a result, the early part of the year could see stocks put on a strong performance.
That would make Bronchick look more stupid than stoic to many investors -- although in the end he may well turn out to be right.
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