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Investors Pull Money From U.S. Stock Funds, ETFs

Bond funds keep pulling in new money as investors fear recession.

Investors pulled their dollars out of mutual funds over the past week, apparently fearful about the state of the economy.

Stock funds saw a $580 million walk out the door the week ended Wednesday, net of purchases. That reversed a small part of the $14.58 billion they took in the the previous week, according to TrimTabs Investment Research of Santa Rosa, Calif.


Dow Jones Industrial Average

closed at 13,444.96 Wednesday, compared with 13,289.45 on Nov. 28.

All of the redemptions came from funds that invest primarily in U.S. stocks, which saw a net $2.28 billion walk out the door. That was an about-face from the previous week, when investors added a net $7.42 billion.

Vincent Deluard, global equity strategist at TrimTabs, said that if the current trend continues, it will result in eight months of straight outflows from U.S. funds, something that hasn't happened since the Black Monday stock market crash in 1987.

He said the numbers apparently indicate the consensus view of the U.S. economy.

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"In the past six months that view has been rather gloomy," he said. "So much money has gone out of U.S. equity mutual funds, you have to believe it's going to come back at some point."

Funds that invest primarily in non-U.S. stocks took in a net $1.70 billion, although that was down sharply from $7.16 billion during the previous week.

Bond funds took in a net $1.57 billion of new money, up slightly from $1.55 billion the previous week.

"Bond flows are going to have a record inflow this year," Deluard said, "and they've been a terrible investment. The average bond fund is down 1.3% for the year."

Deluard said people move toward bonds when they expect a recession. While bonds are viewed as safer, he said, "so far that hasn't worked out."

Hybrid funds, which invest in both stocks and bonds, took in a net of $684 million, reversing the $661 million of outflows the previous week.

Investors also pulled a net $1.15 billion out of exchange-traded funds that invest in U.S. stocks, after adding a net $12.08 billion the previous week.

Meanwhile, ETF's that invest in non-U.S. stocks took in of $4.39 billion of new money, after seeing $620 million walk out the door the previous week.