January 10, 2018 / 7:03 PM / in a year

Investors strip most cash in 4 years from U.S. domestic stock funds

    By Trevor Hunnicutt
    NEW YORK, Jan 10 (Reuters) - Investors are slimming down
equity stakes bloated by a nearly decade-long bull market,
withdrawing $22 billion from U.S. domestic stock funds in a
single week, Investment Company Institute (ICI) data showed on
    The withdrawal, during the holiday-shortened week ended Jan.
3, marked the largest weekly retreat from the U.S.-based
domestic stock funds in nearly four years, according to the
trade group.
    A growing chorus of investors, including GMO LLC co-founder
Jeremy Grantham, are saying the market is in a "melt-up," as
prices start to be driven up irrationally by investors fearing
they are missing out on strong profits. The S&P 500 has
more than tripled since its 2009 low.
    "The current bull market was born on pessimism, grew on
skepticism, and, after a huge run higher, is moving toward a
general feeling of optimism," said Scott Wren, senior global
equity strategist at Wells Fargo & Co's Investment
Institute, in a note on Wednesday.
    "We do not believe the bull market is over. But we are
closely watching, in addition to the fundamentals, investor
sentiment. Because the eventual euphoria, which will come at
some point, will likely be at the top."
    Funds focused on equities outside the United States have
largely been spared withdrawals, attracting cash every week last
year while domestic-focused funds ended the year having posted
    But in the latest week, inflows to world stock funds
weakened to $1.1 billion, the lowest since last January, ICI
said. The group's data covers mutual funds and exchange-traded
funds (ETFs) based in the United States.
    Demand for bonds remained strong despite a yield spike in
December, and again this week, that pushed long-dated
Treasuries' prices down sharply.
    U.S.-based bond fund net inflows rose to $7.6 billion during
the latest week, the largest in 10 weeks. The ICI data does not
include fund inflows or withdrawals that occurred during the
most recent long-bond sell-off.
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in million of dollars):
               1/3      12/27  12/20   12/13   12/6/17
 Equity        -21,009  4,099  -1,584  6,809   8,621
    Domestic   -22,065  1,208  -9,550  5,347   5,962
    World      1,056    2,892  7,966   1,463   2,659
 Hybrid        -327     -940   -2,122  -1,415  -2,139
 Bond          7,570    4,109  1,599   5,015   6,160
    Taxable    7,056    4,487  1,512   4,943   6,471
    Municipal  515      -378   87      72      -311
 Commodity     -305     -296   -434    5       421
 Total         -14,071  6,972  -2,541  10,414  13,064
 (Reporting by Trevor Hunnicutt; Editing by Tom Brown)
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