This chart, that subtracts flows into bond funds from flows into equity funds, illustrates the unprecedented way that the public investor has shunned the stock market. Flows into equity funds have not surpassed bond funds since February 2007. Jeff Hays forwarded me a great quote from a New York Times article last week:
Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.
If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.
Best guess - this story may last longer than we expect, but it will not end well for individual investors. The irony is that this wild stampede into bonds to avoid risk makes bonds riskier and the stock market less so.
Mark Dodson, CFA