News Column

Main Street dumps stocks as markets see new highs

June 11, 2014

By Adam Shell, USA TODAY



Mutual fund investors, long the face of Main Street, have been dumping their U.S. stock funds ever since late April, when the Dow Jones industrial average started its run of new highs.

Investors have withdrawn $13.3 billion more from domestic stock funds than they have invested since April 23, according to data from the Investment Company Institute, the funds' trade group. In contrast, bond funds, which are more conservative and less volatile investments, saw net inflows of $15.8 billion in the same period.

The selling of U.S. stocks signals that Main Street investors are leery of the market, even though the Dow has posted 10 record closes this year. Its most recent record was posted Tuesday, when it flirted with 17,000 for the first time in its 118-year history before closing at 16,945.92.

The broad U.S. market has also gone 32 months without a correction, a drop of 10% or more. On average, corrections happen every 18 months.

The cautiousness on Main Street conflicts with the rising bullishness of professional investors. For example, $5.5 billion flowed into U.S. based exchange-traded stock funds (ETFs), according to EPFR, which tracks the funds. ETFs tend to be traded by institutional investors and financial advisers.

Last week, more than 62% of professional investment advisers that publish market-related newsletters said they are "bullish" -- the highest level since October 2007, according to Gina Martin Adams, senior analyst at Wells Fargo Securities.

The market has exceeded the pros' expectations: Standard & Poor's 500-stock index's June 9 record close of 1951.27 eclipses the year-end price targets of 10 stock strategists, half the 20 prognosticators polled by Bloomberg. Monday's record high is 100 points above the lowest target of 1850 put forth at the start of the year by Wells Fargo'sGina Martin Adams, Deutsche Bank'sDavid Bianco and Barry Bannister of Stifel Nicolaus.

Adams told clients Wednesday that "further near-term market gains may be dependent on the retail investor putting money to work in stocks." At the moment, they are doing the opposite.

"Main Street investors are finally getting smart," says Todd Schoenberger of LandColt Capital. "They realize this bull market can't go on forever, so they don't want to find themselves trapped holding investments that are suddenly losing money."

On Wednesday, the Dow fell 102 points to 16,844.





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Source: USA Today


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