Trend: The Investment Company Institute reports redemptions have been surging in equity mutual funds.
Andrew Mickey at Q1 Publishing describes the mutual fund outflows that indicates that mutual fund investors want out of the stock market.
Mickey's insight: As history has proven time and time again, mutual fund investors buy and sell at the worst possible times.
The herd is running for the exits.
Mutual fund investors are selling out at a faster and faster pace each week.
The Investment Company Institute, which tracks mutual fund inflow and outflows, reports redemptions have been surging in equity mutual funds. The last week of April, investors put in a net $1.85 billion into stock mutual funds. Since then though, it has been all downhill.
Investors pulled out a net $1.44 billion in the first week of May, $10 billion the next week, $1.1 billion the week after that, and $17.4 billion in the last week of May.
It’s happening all over. Canadian investors pulled out between $1 billion and $1.5 billion from mutual funds in May.
The size and consistency of the redemptions has had a noticeable impact on the markets. Aside from the general decline, there real impact can be seen in the last thirty minutes of each trading day.
The last half hour of trading is usually dominated by mutual funds. This relatively brief period is when mutual funds, if they have to meet significant redemptions that day, are forced to sell stocks and raise cash.
The industry which has had as much as $11 trillion of other people’s money to throw around in the U.S. plays a very big role in the markets. That’s why over the last few weeks there have been sizeable sell-offs at the end of a lot of the days....