Investors shift record amounts from U.S. stocks to bonds

Investors shifted record amounts out of U.S. stock funds and into bonds in seven-day period ended Feb. 5, while withdrawing money from emerging-market equities for a 15th straight week.
FEB 11, 2014
Investors shifted record amounts out of U.S. stock funds and into bonds in the seven-day period ended Feb. 5, while withdrawing money from emerging-market equities for a 15th straight week, according to Citigroup Inc. U.S. equity funds had $24 billion of outflows during the period, according to a report Friday from the research unit of the third-largest U.S. bank. Withdrawals from stock funds worldwide totaled $28.3 billion, the report said, citing data from EPFR Global, a fund research company. Money managers plowed $13 billion into U.S. bond funds, accounting for most of the $14.8 billion that flowed into debt worldwide. All the figures for the period are record highs. Bonds beat stocks last month for the first time since August as a slowdown in U.S. jobs growth and turmoil in emerging markets from China to Argentina drove demand for the safest securities. The Federal Reserve's decision to taper its bond purchases in January and again in February did more to temper the appeal of high-risk assets than reduce demand for U.S. debt. 'SAFE HAVENS' “Recent figures spooked people into thinking global growth is not as good as expected, so they sold off on equities and went into safe havens,” said Daphne Roth, head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion. Ms. Roth sold stocks in late January and is holding the money in cash, she said. Investors pulled $6.4 billion out of emerging-market equity funds in the period, according to the Citigroup report by Markus Rosgen and Yue Hin Pong. It was the biggest outflow since August 2010, the report said. Bill Gross, who oversees the world's biggest bond fund at Pacific Investment Management Co., said this week that the pace of economic growth in China is among the biggest questions in developing nations and the largest risks for markets. “We're just going to have to wonder going forward through this year as to the potential problems in China and other emerging markets,” he said on Bloomberg Television. The Bank of America Merrill Lynch Global Broad Market Index returned 1.6% in January, including reinvested interest, while the MSCI All-Country World Index of stocks lost 4%. Investors snapped up bonds after the U.S. reported Jan. 10 that payrolls rose by 74,000 in December, less than the 197,000 median forecast of economists surveyed by Bloomberg News. The January report released Friday showed a dismal 113,000 new jobs; economists had forecast 185,000. A Bloomberg customized gauge tracking 20 developing-nation currencies fell 3.1% in January and has rebounded 0.8% this month. Fed policy makers cut their purchases of Treasury and mortgage debt in two steps to $65 billion a month from $85 billion, citing improvement in the outlook for the labor market. (Bloomberg News)

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