Investors Are Exiting U.S. Stock Funds During 2023 Rally

Investors have pulled a net $31 billion from U.S. equity mutual funds and exchange-traded funds in the past six weeks, according to Refinitiv Lipper data through Wednesday. That marks the longest streak of weekly net outflows since last summer and the most money pulled in aggregate from domestic equity funds to start a year since 2016.

Over the same period, investors have funneled roughly $12 billion into international equity funds, about $24 billion into taxable bond funds and nearly $3 billion into municipal bond funds.

Flows toward funds outside of domestic equities indicate a level of apprehension from investors who aren’t buying the 2023 rebound in U.S. stocks, some analysts say. The outflows provide little reassurance to investors wrestling with fears that market sentiment could be turning. Last week, the S&P 500 dropped 1.1%—its first weekly decline of the year—trimming its 2023 gains to 6.5%. 

“The sense of opportunity certainly lies elsewhere,” Cameron Brandt, director of research at fund-flow and allocation data provider EPFR, said of U.S. equity funds.

The exodus from U.S. stock funds underscores the divergence between investors skeptical of the market’s year-to-date rise and those eager to ride the wave higher. Some investors are putting money into ultrasafe fixed-income assets and choosing funds of cheaper stocks abroad. 

Others are going all in on speculative stocks and turbocharging those bets with risky options trading. Some are racing to scoop up shares of individual stocks like

Tesla Inc.,

pushing the electric-vehicle company’s stock up 60% to start the year.

The 2023 rebound has been driven in part by hopes that the Federal Reserve will cut interest rates later this year as inflation moderates—though central bank officials have repeatedly said they see higher rates for longer to try to ease price pressures. January’s stronger-than-expected jobs report served as a reality check for some investors, forcing…


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