Retail investors committed about $1.6 billion to stock mutual funds in early May, continuing a trend that has been in place for the past few months. Meanwhile, taxable bond funds attracted a robust level of inflows for the ninth week in a row.
Experts say it’s a tricky but generally positive time to look at global equities. “The recovery in the global economy is real, with the U.S. economy likely to surprise on the upside moving forward,” said David Eiswert, portfolio manager for Global Focused Growth Equity Strategy at T. Rowe Price.
“Further growth in economic activity is needed to drive the next stage of the equity-market cycle, and we believe the foundations are in place for this scenario,” Eiswert explained in an April report.
“As we move on from the ‘responsive’ phase of the cycle and into the ‘improvement’ phase, the drivers of equity returns will be different and arguably more complex. These remain exciting times for global equity investors, however,” he stressed.
U.S. retail and institutional investors added $4.2 billion into stock funds (including ETFs) in late April, according to Lipper, with mutual funds gaining about $1.6 billion of these assets. They also put about $710 million in taxable bond funds, the weakest level in seven weeks. Emerging markets stock funds had $352 million of inflows.
In terms of outflows in the final week of April, high-yield bond funds experienced the loss of some $630 million of assets; this is their biggest outflow level since February, Lipper says. Investment-grade bond funds had about $74 million in outflows, while floating-rate loan funds posted $663.7 million in outflows, their biggest outflows since August 2011.
Funds focused on U.S. Treasuries attracted $440 million in inflows, and funds with inflation-protected bonds drew $174 million for their second-straight week of improving demand.
To add their money to equity products and a select group of bond funds, investors took $5.5 billion out of money market funds.
Investors added nearly $9 billion to stock funds and moved funds out of U.S. Treasuries, for the week ending April 9. A week earlier, they had put close to $5.5 billion into stock funds, as was as almost $4 billion into taxable bond products.
In early April, when market volatility rose, investors chose to take more than $225 million out of commodities and precious-metals funds. They also withdrew more than $11 billion from money markets. At the same time, as issues plagued Ukraine and Russia, emerging-market funds drew over $2.2 billion in inflows.
Judging from such behavior, investors seemed confident the trends of fund performance in the first quarter of 2014 would continue through at least the second quarter. During the first three months of 2014, equity funds were just able to post their seventh consecutive quarter of positive returns.
Overall, equity funds improved 1.47% on average, with sector-equity funds rising 4.05%, according to Lipper. U.S. diversified-equity funds increased 1.33%, while world-equity funds squeezed out an improvement of 0.40%).