Investors Flee U.S. Stocks Even As Market Soars

It looks like investors are fleeing U.S. stocks

For at least five weeks straight, they pulled almost $27 billion from mutual funds and exchange-traded funds that specialize in domestic U.S. securities.

The action, which looks like some are bailing on the future of America’s economy, comes just as stock indexes are breaking records with banal frequency.

Bailing Out on Stocks

In the week through November 20, investors cashed in $7 billion from domestic equity funds, according to a recent report from the Investment Company Institute, which studies the fund industry.

The week before it was $3.3 billion. You get the idea.

Mostly these weekly outflows were between $3 billion and $7.7 billion. In total, $26.9 billion got cashed out over the five-week period.

Some of the cash went to foreign stocks, but even more, went to bond funds. When investors buy bonds, it is usually because they are cautious or afraid. The price of fixed income securities usually remains more stable than do stock prices.

Stocks Soar to New Highs

Meanwhile, those investors who bailed could have been losing out as stocks on Wall Street have soared. The Dow Jones Industrial Average hit an all-time high Tuesday of more than 28000. That milestone got passed just a few weeks after the index breached 27000 in July.

That means that all of those nervous nellies who fled U.S. stocks. In just the last month the Dow Jones average gained almost 4%.

However, there is some good news. When investors flee stocks in this manner, it is usually a sign of a healthy market. If every investor remained fully invested in stocks, then there would be no one left to buy. That’s usually when the market is nearing a peak and is about to fall.

Obviously, that means we should see more gains ahead for the major indexes.

Show More

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button