Are investors pulling their money and parking it in savings accounts? Read this investor insight by TrimTabs Asset Management to learn more about recent bond mutual fund and ETF flows as well as supply and demand activity with the stock market.
A record $79.7 billion has been pulled out of bond mutual funds and exchange-traded funds since the start of June ($67.9 billion in June and $11.8 billion in July through Thursday, July 11). The latest data suggests most of this money has been making its way into savings deposits and retail money market funds. In the five weeks ended July 1, savings deposits took in $74.8 billion, while retail money market funds took in $33.0 billion. Far less of the money seems to be flowing into equities. All equity mutual funds and exchange-traded funds have received $20.8 billion since the start of June.
Given the unprecedented outflows from bond funds and the turmoil in the bond market, we were not surprised that Federal Reserve Chairman Ben Bernanke offered the markets some soothing words last week, which promptly cheered investors. Unfortunately for the bulls, our demand-side indicators have deteriorated, particularly for the short term. Investors in leveraged ETFs turned much less pessimistic in the past week, which is negative from a contrarian perspective. Outflows from leveraged long ETFs plummeted to just 0.6% of assets, while inflows into leveraged short ETFs slowed to 2.4% of assets. Another cautionary sign is that investors in U.S. equity ETFs are turning upbeat. These ETFs issued $16.6 billion (2.0% of assets) in the past month, the highest trailing one-month inflow since June. We pay careful attention to ETF flows because ETF investors tend to be poor market timers.
On the supply front, U.S. companies have been net buyers of shares. In Q2 2013, they announced $257.1 billion in new cash takeovers and new stock buybacks, the highest volume since Q3 2007. This buying swamped the $80.1 billion in new offerings. Since the start of June, announced corporate buying (new cash takeovers + new stock buybacks) of $80.2 billion has been $52.2 billion higher than new offerings of $28.1 billion. But the new offering calendar might be a bigger headwind to the market this week than it has been recently. Dealogicreports that 13 deals-including nine IPOs-expected to raise a total of $2.0 billion are already scheduled, and the flow of overnight deals could pick up with the S&P 500 sitting at a record closing high.
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