Will retail investors reverse the trend that saw equity mutual funds register their eight straight month of outflows in December?
Funds that invest primarily in U.S. equities saw US$140-billion in outflows during the past eight months, according to the Investment Company Institute. That figure surpassed the amount recorded at the worst of the 2008-2009 credit crisis, according to Stéfane Marion, chief economist and strategist at National Bank Financial.
The move out of U.S. equities has resulted in the stock-to-bond ratio for mutual funds falling to the lowest since 1994. However, investors do still own more equities than bonds, with a ratio of 1.85.
“At this juncture, we believe that improving economic data in the U.S. combined with a decent Q4 2011 earnings season will provide the impetus that will stop the bleeding in U.S. equity mutual funds,” Mr. Marion said in a research note, reiterating his 2012 target of 1,350 for the S&P 500.
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