Fund Flows Shift Dramatically This Year as Investors Embrace Risk. All Equity Funds Get $281 Billion, Biggest Inflow since 2000. Bond Funds Redeem $24 Billion, Biggest Outflow since 2000.
The Federal Reserve has been trying for almost five years to coax savers and investors into stocks by printing money to inflate the prices of assets in general and U.S. stocks in particular. The Fed finally seems to be succeeding. We are witnessing the biggest shift in fund flows since the crash of 2008.
On the one hand, investors have flocked to equities. The inflow of $281 billion into all equity mutual funds and exchange-traded funds this year through Monday, October 28 is the biggest annual inflow since the height of the technology stock bubble in 2000, when $324 billion flowed into equity funds. Breaking flows down, U.S. equity MFs and ETFs have issued $124 billion this year, the first annual inflow since 2007. Global equity MFsand ETFs have issued $157 billion this year, the fifth consecutive annual inflow.
On the other hand, bonds have fallen out of favor as yields started to back up in May and investors contemplated “tapering” by the Fed. Bond MFsand ETFs have lost $24 billion this year, the first annual outflow since an outflow of $7 billion in 2004 and the biggest annual outflow since an outflow of $50 billion in 2000.