Updated from 9:30 a.m. EDT
Money moved out of equity funds for the third consecutive week, as the stock market's spring swoon deepened, and continued to head for the safety of money market funds.
According to AMG Data Services, there were net cash outflows of $626 million from stock funds in the week ended May 19 with 88% coming from domestic funds. Last week AMG reported outflows of $2.4 billion.
Robert Pavlik, portfolio manager at Oaktree Asset Management, says individual investors are pulling money out of the market because the tangible factors facing them - higher interest rates, higher oil prices, and the troubled occupation of Iraq - are outweighing less obvious factors like better corporate earnings.
TrimTabs, a rival fund flow tracker, reported net outflows of $499 million from equity funds down from the prior week's $612 million, with $215 million heading out of U.S. stock funds and $284 million leaving international stock funds.
"Given the state of the market the surprise is that it wasn't worse," said TrimTabs president Charles Biderman. "In the last two weeks the average equity fund is down 3.4% and the total outflow has been under $1 billion. That's not too high a number given the sell-off."
Investors looking for shelter from market's turbulence have found it in money market funds which reported net inflows for the second straight week of $8.3 billion. But Biderman says the money being yanked from both the equity and bond markets is also being directed towards "good old fashioned bank savings accounts", a sign in his opinion that the "the rampant bullishness that existed earlier in the year is gone."
Bond funds saw losses ahead of a widely expected summer interest rate hike by the
. TrimTabs showed a net outflow of $2.28 billion from bond funds, down from the prior week's outflow of $3.62 billion.
"Bond funds are headed towards a May outflow of $11.3 billion, rivaling the $12.6 billion we saw in August 2003," says TrimTabs director of research Carl Wittnebert. "Of that outflow, $6.7 billion is from high yield funds."
AMG reported high yield corporate bond funds seeing losses of $989 million for the week and government funds investing in mortgage-backed securities with outflows of $921 million. On the whole, taxable bond funds reported net cash outflows of $2.1 billion.
International equity funds reported net redemptions of $98 million with emerging markets equity funds reporting significant outflows totaling $290 million.
Municipal bond funds reported net cash outflows of $1 billion.