Stocks may be near record highs, but investors are getting out.
New data released Wednesday show investors have slashed their exposure to U.S. stocks in recent weeks, choosing instead to pile into bonds or simply hold cash.
Many are still fearful of another major drop in the stock market, and they aren't sure how to read the current conditions. It's a peculiar period in the market with tumbling small-cap stocks, diminished volatility and low interest rates for the foreseeable future.
"Investors' fear over the equity market has not faded from the crisis. That may need a generation to pass," said Brian Rehling, chief fixed income strategist at Wells Fargo Advisors, which manages about $1.4 trillion in assets.
It's clear that trepidation is leading at least some investors to back off -- even as many strategists stress the need to stay exposed to stocks as the economy improves.
Investors yanked about $8.2 billion from U.S. long-term equity mutual funds during the three weeks ending May 14, according to the Investment Company Institute. These funds were hit by $2.3 billion in net outflows in the final week alone.
By comparison, domestic stock funds experienced net inflows of $4.1 billion during the prior three-week period that ended April 23, according to ICI stats.
The money coming out of stocks is increasingly flowing into bonds, helping to drive interest rates unexpectedly lower. The yield on the benchmark 10-year Treasury plunged below 2.5% last week for the first time since Halloween.
ICI said bond funds generated $4 billion of inflows during the week ended May 14, contributing to a three-week influx of $10.4 billion. In fact, bond funds have enjoyed positive flows every month this year except January.
The CNNMoney Fear & Greed Index stood at 25 on Wednesday, indicating "extreme fear." That's down from 89 a year ago, which signaled "extreme greed."
Wells Fargo Advisors has only experienced "some modest outflows" from equity funds, Rehling said, adding that it's been "nothing that is moving the needle."
He said that disparity could be due to the fact that Wells Fargo, like many brokerages, has far less exposure to the small-cap stocks that have been under assault in recent months. Most of its investors stick with large cap stocks.
Last week, the Russell 2000 index of small-cap stocks fell into correction territory (market jargon for a 10% fall from a prior high).
While Wells Fargo isn't necessarily seeing a rush out of stocks, Rehling said many clients continue to hold "exceptionally large" amounts of cash in their portfolios. He's advised them to have the courage to deploy that cash into the stock market when opportunities arise.
"Stay the course. Stay well diversified. When you do get pullbacks, take advantage and move cash off the sidelines," Rehling said.
Individual investors continue dip back into U.S. stocks as the Dow and S&P 500 get closer to new record highs, but the pace has slowed.
U.S. stock mutual funds raked in $3.5 billion during the week ended Jan. 23, according to data from the Investment Company Institute, making it the third consecutive week that investors added money to U.S. stocks. Altogether, investors have plowed more than $16 billion into the market during MOREHibah Yousuf - Jan 31, 2013 11:25 AM ET
The U.S. stock market has been on a bull run since early 2009. At the same time, individual investors have been pulling billions of dollars out of stocks each year.
As the S&P 500 rallied about 13% during the first eleven months of 2012, individual investors yanked about $152 billion from the U.S. stock market, according to data from EPFR Global, a Boston-based firm that tracks fund flows for both mutual MOREHibah Yousuf - Dec 27, 2012 7:32 AM ET
Investors continued to pull money out of U.S. stock funds last week, but the pace of outflows slowed considerably.
U.S. stock mutual funds lost just $481 million in the week ended Nov. 28, according to the Investment Company Institute, far less than the previous week's $7.5 billion withdrawal.
In total, investors have yanked more than $14 billion during the three weeks following President Obama's re-election, as they turn their attention to the MOREHibah Yousuf - Dec 7, 2012 10:05 AM ET
The stock market keeps going up, and investors keep cashing out.
Mutual fund investors pulled $5.1 billion out of U.S. stock mutual funds for the week ended Sept. 26. The prior week, investors removed $4.8 billion from these funds, according to data from the Investment Company Institute.
The exodus from the stock market has picked up speed since the Federal Reserve announced another round of quantitative easing, or QE3.
By buying more MOREMaureen Farrell - Oct 4, 2012 12:45 PM ET
Investors in the rest of the world continued to buy U.S. investments in June, the Treasury Department said Wednesday.
Foreign investors purchased a total of $16.7 billion worth of U.S. securities, according to the latest Treasury International Capital (TIC) report. That's down sharply from May, when the same class of investors bought a total of $121.3 billion worth of U.S. securities.
TIC data measure the flow of funds into and out of MOREBen Rooney - Aug 15, 2012 11:34 AM ET
The flight out of U.S. stocks picked up speed last week, as investors were left disappointed by the Federal Reserve's failure to take steps to stimulate the economy.
Investors yanked $5.7 billion out of U.S. stock mutual funds during the week ended Aug. 1, more than twice the amount pulled during the prior week, and the most since the week ended May 23. The outflow was also the fourth-biggest this year.
Investors MOREHibah Yousuf - Aug 9, 2012 9:31 AM ET
Investors recently dipped a toe back in the stock market, but the water was apparently not fine.
According to the latest report on mutual fund flows from the Investment Company Institute, investors pulled $2.1 billion out of U.S. stock mutual funds during the week ended July 25. That came after modest inflows of $99 million during the prior week.
Overall, investors have been taking money out of domestic stock mutual funds for MOREBen Rooney - Aug 2, 2012 12:57 PM ET
Investors have mostly been pulling their money out of the stock market this year, but last week investors showed a little ounce of love for stocks.
According to the Investment Company Institute, investors added $99 million to U.S. stock mutual funds in the week ended July 18. While that's not much, it's a welcome change from the usual flight from stocks.
The inflow came as investors hoped that the Federal Reserve may MOREHibah Yousuf - Jul 26, 2012 2:12 PM ET
In an unexpected twist, investors added money to U.S. stocks during the final week of May, even as the market closed out one of the its worst months in years.
According to the Investment Company Institute, investors added $807 million to U.S. stock mutual funds in the week ended May 30. While that's not much at all, the sudden move ends a 14-week-long exodus out of stocks. In fact, the inflows follow MOREHibah Yousuf - Jun 6, 2012 3:45 PM ET
|Two hours and 1,600 fake credit cards later: $13 million is gone|
|'Beauty and the Beast' trailer teases Emma Watson as Disney's Belle|
|Premarkets: 4 things to know before the open|
|Meet the 12-year-old accepted to two colleges May 23|
|Millionaires chalk success up to hard work and family values|