Investors have pulled over $8 billion so far in 2013 from the largest ETF in the land, SPDR S&P 500 (NYSEArca: SPY), despite the Dow Jones Industrial Average rising to a new all-time high this week.
The outflows are notable but could simply reflect a rotation among large individual investors who often use the S&P 500 ETF to park cash on a short-term basis. For example, Vanguard S&P 500 ETF (NYSEArca: VOO) has experienced net inflows of $1.4 billion year to date, according to IndexUniverse data.
Yet despite the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) hitting a new record, fund flows and trading volume elsewhere are still indicating that many investors remain shy to get back into the stock market. [Dow Clears All-Time High]
“In the past, stock indexes have often drifted lower in the months after breaking through previous record highs,” the Associated Press reports.
WSJ.com’s MarketBeat blog notes that investors have been mistrustful of the market rally since the financial crisis, judging by dwindling fund flows and trading volume. “Only recently has the retail investor started coming back to stocks, although the worry is with the market at record highs, the little guy could potentially be ‘buying high,'” it says. [ETFs See the Best Two-Month Start Ever]
Another point that proves investors are still stock market shy is the lack of trading volume. Overall trading volume has been trending lower. As the stock market is healing and flirting with new highs, investors are ultimately lacking any confidence in the rally continuing.
Investors are dissuaded by the tech bubble in the 1990s, the 2008 housing bubble bust, the May 2010 flash crash in the stock market and the recent IPO flops have not helped to gain the trust of retail investors.