August 9, 2017 / 5:00 PM / a year ago

Investors pull more cash from U.S. domestic stock funds -ICI

    By Trevor Hunnicutt
    NEW YORK, Aug 9 (Reuters) - Momentum for domestic U.S. stock
funds waned during the latest week, with investors pulling cash
from those products for a sixth week out of the last seven,
Investment Company Institute (ICI) data showed on Wednesday.
    The funds posted $3.9 billion in withdrawals during the week
ended Aug. 2, the trade group said, even as U.S. stocks steamed
higher. The S&P 500 is on pace to deliver double-digit
percent returns for seventh year in the last decade.
    Investors say that rise has left U.S. stocks richly valued
and that they have been moving to taxable bonds and
international stocks. Each of those categories had a 35th
straight week of inflows, according to ICI. 
    Taxable bonds added $6.1 billion, while world stock funds
attracted $4.2 billion.
    Bond funds sold $203 billion in shares during the first half
of 2017, compared to $136 billion in stocks. Of that, domestic
equities took in just $4.3 billion, ICI data showed.
    Phil Bak, chief executive at ACSI Funds, said the growth in
index funds that own big stakes in technology companies like
Facebook Inc and Apple Inc has exacerbated fears
of a top-heavy market.
    "A lot of people feel that trade will start to unwind," said
Bak, whose firm is based in Ann Arbor, Michigan.
    But stocks are not trading in tandem, meaning there are
relative winners and losers and in the market. A CBOE S&P 500
Implied Correlation Index that uses options to measure
how much markets expect stock prices to move together is trading
at 31.4, compared to 57.7 on the day of the U.S. election in
November, a turning point for markets.
    S&P 500 earnings for the second quarter rose an estimated 12
percent, according to Thomson Reuters I/B/E/S. But in recent
days some large companies turned in disappointing results,
including airlines, and the U.S. Food and Drug Administration
announced it wants to reduce nicotine levels in cigarettes,
hitting Altria Group's shares.
    Bak said a lack of correlations between stocks creates a
good environment for investors who pick equities beyond those
held in the highest proportion by indexes such as the S&P 500.
    "We think it's a pretty good environment to be in stocks,"
he said.
    The following table shows estimated ICI flows for mutual
funds and exchange-traded funds (all figures in millions of
                8/2    7/26    7/19    7/12  7/5/2017
 Equity         240   4,969   2,976   3,021    -6,478
 -Domestic   -3,921   1,055  -4,542  -2,118   -11,551
 -World       4,161   3,915   7,518   5,139     5,073
 Hybrid        -943    -350    -664    -688      -481
 Bond         7,006   6,375  13,611   4,780     5,824
 -Taxable     6,106   5,651  12,810   4,438     6,072
 -Municipal     899     724     801     341      -248
 Commodity     -359  -1,168  -1,014    -249      -583
 Total        5,944   9,827  14,909   6,864    -1,719
 (Reporting by Trevor Hunnicutt; Editing by Meredith Mazzilli)
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