Image by Getty Images via @daylifeIndividual investors are fed up with the stock market. Burnt by 10 years of negative returns, two crashes, and a current economy mired with high unemployment and lackluster growth, many are throwing in the towel.Investors have pulled $33.12 billion from U.S. mutual funds this year through July, according to the Investment Company Institute, the mutual fund industry trade group. With the exception of 2008 (height of the financial crisis), that’s on pace to be the worst year for stock funds since the 1980s, reports The New York Times.
What’s interesting is, this mass exodus comes at a time when stocks are holding up relatively well, as Aaron and Henry point out in this clip. The Dow Jones Industrial average has been volatile but is down less than 2% this year. Not exactly crash territory.
The next bubble?
Investors are fleeing the stock market in favor of bond funds. It’s happening at such a staggering rate, Bloomberg compares the flood of money into bonds to the stock market bubble surrounding the dot.com craze:
“Investors poured $480.2 billion into mutual funds that focus on debt in the two years ending June, compared with the $496.9 billion received by equity funds from 1999 to 2000, according to data compiled by Bloomberg and the Washington-based Investment Company Institute.”
Contrarian investors view this exuberance for fixed-income funds as a potential signal of the beginning of a new bull market in stocks. Plus, there could be another enemy lurking in the wings for bondholders, as Aaron and Henry discuss: If inflation takes hold, as many predict it will, bonds will get “hammered.”
http://finance.yahoo.com/tech-ticker/the-next-bubble-investors-flee-stocks-in-droves-in-favor-of-bonds-yftt_535357.html;_ylt=AjsgIZYN4G4XlAwQJ50PU2Peba9_;_ylu=X3oDMTFnbmN1Ymc2BHBvcwMzBHNlYwNjb250ZXh0dWFsLXRlY2h0aWNrZXIEc2xrA3RoZW5leHRidWJibA--
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