Mutual fund investors last month made their biggest retreat from stocks since the bull market began more than two years ago.
A net $17.3 billion was withdrawn from stock funds in June, while bond funds attracted new cash for the fifth consecutive month, industry consultant Strategic Insight said on Thursday.
It was the biggest monthly flow out of stock funds since March 2009, when stocks hit bottom after the financial crisis. Net withdrawals totaled more than $20 billion that month.
Last month's withdrawals came as the Standard & Poor's 500 stock index fell 1.7 percent amid a spate of disappointing jobs and manufacturing news suggesting the economic recovery may be stalling. Stocks fell sharply at the beginning of June, then rallied in the final week to recover most of the earlier loss.
June was the second consecutive month when investors withdrew more than they deposited into stock funds. Stock funds attracted net deposits for the first four months of the year, and the year-to-date flow total remains positive, with net deposits of $22.5 billion.
But in June, investors apparently didn't have the stomach for volatility, which was fueled by fears of a Greek debt default, as well as the slowdown in the U.S. economic recovery.
"U.S. investor confidence is clearly fragile, and will remain so for the foreseeable future," said Avi Nachmany, research director with Strategic Insight.
Other details of how investors moved their money in June:
• Foreign stock funds: Investors added a net $2.3 billion into funds that buy foreign stocks. Flows into this category have been positive for 13 consecutive months.
• Bond funds: Investors added a net $12.6 billion. Bond fund flows have been positive each month since February, as investors have returned to the play-it-safe strategy they adopted after the stock market meltdown of 2008. Over the next two years, investors deposited about $700 billion into bond funds, while consistently withdrawing from stock funds. Year-to-date, bond funds have attracted $68 billion in net deposits.
• Taxable bonds, a category that includes corporate bonds, accounted for the bulk of last month's flow into bond funds, with $11.7 billion in net deposits. Municipal bonds, which buy the debt of state and local governments, attracted net deposits of $900 million. That was significant because it marked the first month of positive flows for muni bonds since October. The next month, investors began exiting muni bond funds, fearing that states and cities were in critically poor financial shape. But the surge out of muni bonds eased in the spring, along with worries about state and municipal fiscal health. So the slightly positive flow in June wasn't a big surprise.
• Exchange-traded funds: A net $10.6 billion was deposited into U.S. ETFs, which bundle together investments in a particular market index. Unlike mutual funds, they can be traded during daily sessions just like stocks. June's net deposit total was more than twice as big as May's $4.5 billion figure. ETFs continue to grow fast. Strategic Insight says ETFs are on pace for their fifth consecutive year with net deposits of $100 billion or more. Year-to-date, $58 billion has flowed in.
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