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Posted by on Aug 2, 2013 in AdvisorShares, Market Insight

Far More Money Pulled out of Bonds Flows into Cash Than into Equities

Far More Money Pulled out of Bonds Flows into Cash Than into Equities

By: Minyi Chen, CFA, Chief Operating Officer of TrimTabs Investment Research and Portfolio Manager of AdvisorShares TrimTabs Float Shrink ETF (NYSE Arca: TTFS)

There is a “rotation” underway in the investment world but would we call it “great?” Read this investor insight by TrimTabs Asset Management to learn more about the recent fund flows and what other activity indicates at the close of July.

Investors Pull Record $87.8 Billion out of Bond Funds in June and July, Breaking String of 21 Consecutive Monthly Inflows.  Far More Money Pulled out of Bonds Flows into Cash Than into Equities. 

Fund investors abruptly ended their long-standing love affair with bonds this summer.  Since the start of June, bond mutual funds and exchange-traded funds have redeemed $83.2 billion.  This outflow is equal to 2.2% of these funds’ assets and is by far the largest two-month outflow on record.

Far More Money 8.2.13 - Chart 1

Source: TrimTabs Investment Research
Past performance is not indicative of future results.
The outflow of $68.0 billion in June was the biggest on record, while the outflow of $19.8 billion in July has been the fourth-biggest on record.  Moreover, these outflows interrupted a string of 21 consecutive months of inflowsFar More Money 8.2.13 - Chart 2
Source: TrimTabs Investment Research
Past performance is not indicative of future results.

The latest data suggest far more of the money that has come out of bonds this summer has been stashed under the mattress than has flowed into equities.  In the latest seven weeks ended in the week ended July 15, $123.6 billion poured into savings deposits, while $34.4 billion flowed into retail money market funds.  The combined inflow of $158.8 billion is three times the $53.5 billion that flowed into all equity MFs and ETFs in June and July.


Flows in Seven Weeks Ended July 15

Far More Money 8.2.13 - Chart 3

There is definitely a “rotation” underway in the investment world, but it is premature to call it “great,” and the “rotation” is funneling far more money into cash than equities.  Given the lofty valuation of the U.S. stock market, we cannot blame investors—particularly those with a long-term outlook—for favoring cash over stock.

This communication is a publication of TrimTabs Asset Management. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Information presented does not involve the rendering of personalized investment advice. Content should not be construed as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein. Performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing performance returns. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Past performance may not be indicative of future results. Therefore, no investor should assume that the future performance of any specific investment or investment strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions, may materially alter the performance of an investor’s portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio.


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