Investors Pull $30B from Stock Market

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Financial specialists and investors are pulling a constant flow of cash from the U.S. securities exchanges, marking a shift in investor sentiment and concern among the bulls.

The $2.6 billion pulled from U.S. equities last week brought outflows to $30 billion since late June, according to Bank of America. EPFR, a well-known data provider, found that the withdrawals were derived primarily from institutionally-managed funds.

The constant flow of withdrawals adds to worries about the sustainability of the current bull market. The S&P 500, which is up 9.1% this year to close with 2443 points on Friday, is now a signal of caution to many fund managers and investors.

Other indicators are keeping investors cautious as well; the number of equities hitting new highs in U.S. exchange markets are noticeably declining. Dow transports, generally observed to rise and fall with the economy, have lately entered a bearish trend, as have Dow industrial components. Combined with other technical factors, investors are anticipating more turbulence ahead.

Thomas Lee, Managing Partner at Fundstrat Global Advisors, noted “the S&P 500 is set for about a ~4%-5% decline in the next month towards 2,300 or so” in a Friday memo to his clients.

Numerous speculators say the attention is on Washington, where President Donald Trump hasn’t yet made significant ground on his promised business-friendly proposals (e.g. tax-code reforms and infrastructure efforts). Anticipations of such programs helped drive the stock market into the black after the election of November 2016.

Before it can handle the tax code, Congress must swim into a web of complexity over lifting the debt ceiling and passing a spending bill, which could have immense potential on the stock market.

While outflows in U.S. markets have remained high, investors have placed greater buying interest in international stocks. Last week saw $3.1B placed in Japanese equity funds, per a Bank of America report. Europe saw similar inflows; European equity funds saw six consecutive weeks of inflows through the middle of August, although $200M was pulled out of the markets last week.

Investors are still affected by the losses during the 2008 financial crisis, making them hesitant to put money into U.S. stocks. Regardless, U.S. markets are still going higher.

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