As U.S. stocks surge, do small investors now want in?
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It’s looking like more individual investors just can’t stand being on the sidelines anymore as the stock market continues to rally.
The net cash inflow to U.S. stock mutual funds in the seven days that ended April 7 was $1.94 billion, the largest one-week inflow since mid-January, the Investment Company Institute said Wednesday.
These weekly numbers aren’t huge relative to domestic stock funds’ total assets of $3.6 trillion. But it’s the trend that counts: As everyone knows by now, individual investors have been pouring money into bond mutual funds over the last year, while from August through February they were mostly net sellers of domestic stock funds -- meaning redemptions from the funds exceeded purchases for most of that period.
A sustained inflow of cash from small investors could provide another source of fuel for the 13-month-old bull market, which staged another broad advance Wednesday.
The Dow Jones industrial average jumped 103.69 points, or 0.9%, to 11,123.11, a new 18-month high, powered by strong earnings reports from Intel and JPMorgan Chase, surprisingly good March retail sales data and Federal Reserve Chairman Ben S. Bernanke’s confidence about the economic recovery.
Of course, Wall Street also will worry that if the general public finally is warming to U.S. stocks, the market must be topping, with the Dow now up 70% from its bear-market low in March 2009.
But bond mutual funds remain by far the investment of choice for most investors: Bond funds took in a net $6.5 billion in the seven days that ended April 7, according to the ICI.
And given the choice of pumping cash into domestic or foreign equities, mutual fund investors continue to favor overseas portfolios: Foreign stock funds took in $2.9 billion in the latest week, $1 billion more than domestic funds.