U.S. stock markets may be continuing their slog higher, hitting fresh record highs this week, but retail investors have decided to lighten their load with equity funds seeing the first outflows since the start of 2014, according to new data.
U.S.-based stock mutual funds – which exclude exchange-traded funds – saw net outflows of $1.7 billion in the week ending July 2, according to research tracker Lipper on Thursday. It marked the first time outflows were seen for 27 weeks, said the company.
These stock mutual funds are traditionally purchased by retail investors, whereas ETFs – which track a benchmark index – are believed to be more frequently used by institutional investors, according to Thomson Reuters, the parent company behind Lipper. Stock exchange-traded funds saw net inflows of $4.8 billion last week.
Whilst this might ring alarm bells for some, with hefty valuations leading many to question the recent bull market in equities, Brenda Kelly, chief market strategist at brokerage IG, believes that the outflows are understandable with the second-quarter earnings season just around the corner.
“In light of the poor GDP (gross domestic product) number in the first-quarter stateside, investors will likely want to know whether or not companies have experienced a rebound in activity in (the second quarter),” she told CNBC via email.
“Revenues have for the most part exceeded expectations over the past four quarters so there’s a good chance some are awaiting confirmation that this can happen again.”