Investor money is hemorrhaging out of global stock funds at a pace not seen since just after the financial crisis exploded.
Global equity funds have seen outflows of $12.4 billion in June, a level not seen since October 2008, according to market research firm TrimTabs. Lehman Brothers collapsed in September of that year, triggering the worst economic downturn since the Great Depression and helping fuel a bear market that would see major indexes lose more than 60 percent of their value.
The most recent exodus, which includes exchange-traded and mutual funds, comes amid worries that the much-touted synchronized global expansion is running out of gas, as well as some unwinding of what had been a hugely successful trade in emerging market stocks.
As the emerging market and non-U.S. trade has and fears have intensified over a trade war, investors have fled global stocks and returned to the U.S., where funds have seen $6.3 billion in inflows. The iShares emerging market ETF has seen $5.4 billion in outflows in June, the most of any fund, according to ETF.com.
“U.S. dollar strength and persistent underperformance seem to be driving fund investors away from non-U.S. equities,” TrimTabs said in a note.
Interestingly, one of the regions suffering the lowest level of investor fear is China, where funds have seen a net inflow of $150 million even though the nation’s main stock index has plunged into a bear market, defined as 20 percent below its most recent high.
For investors, then, the main question may be whether the outflows elsewhere are signaling something more ominous or are merely setting up another buying opportunity as valuations get cheaper.
Trader Georgi Bozhidarov