By: Dan Weil
February 11, 2014
Investors took $28 billion out of equity mutual funds in the week ended Feb. 5, the largest weekly outflow since August 2011, when Washington was fighting over the debt limit, according to Citigroup and EPFR Global.
The Standard & Poor’s 500 Index has slid 2.4 percent so far this year, though it has rebounded for the last three sessions. Investors are worried about weakness in the U.S. and overseas economies.
Institutional investors are responsible for the large shift out of equity mutual funds, according to Goldman Sachs. They are eager to diversify out of stocks after last year’s strong gains.
“A divergence between institutional and retail activity has surfaced,” Marc Irizarry and fellow Goldman equity analysts write in a commentary obtained by CNBC.
Institutional investors are rebalancing their portfolios to avoid being overweight in stocks, the Goldman team says.
And “a broader definition of equity” has led institutional investors away from standard stock investments and into absolute return and natural resource funds, they explain.
“These points run counter to the view of a ‘rotation’ toward equities and instead favor non-traditional bonds, alts [alternative investments] and innovative equity product,” the Goldman analysts note.
Meanwhile, Ned Davis Research says a bear stock market, generally defined as a decline of at least 20 percent, isn’t out of the question for this year.
In a recent report, the firm, which has been bullish on stocks for most of the rally since March 2009, says it expects continued gains for now, The Wall Street Journal reports.
But the firm warns that if investors grow overly enthusiastic during the next several weeks, sending prices too high, the market could tumble later in the year.
Gold Goliath is not your typical gold dealer.