There seems to be a number of investors abandoning American stock funds last month in what is considered the biggest withdrawal since the financial crisis less than 10 years ago. While it could be taken as a negative sign, there are a few investors who view it as an omen that stocks could have a chance to grow.
In April, the U.S. equity mutual funds and exchange-traded funds (ETFs) saw a rush of $35.8 billion in the largest move away from American stocks since October 2008, which sets a tone where leveraged short ETFs showed a rise in assets by 4.6 percent. Leveraged long ETFs saw a drop of 2.5 percent.
That tone stands in blunt disparity to recent warning signs that American stocks are in a vigorous and bubbly condition. But some take the outflows as proof the current bull market is maintaining its standing as the most unloved markets in history.
Some believe this could become a positive of American stocks because there’s less of a chance of having a financial crash while more people are fleeing equities and the bubbly kind of conditions lead to very sharp adjustments in equities. There have not been many large flows seen in past bull markets. Investors are just as worried they missed a chance to not put new money to work when there is a 52-week high in the market.
But another reason for the recent outflows could be that investors are wanting to change their focus to the pursuit of other global opportunities, with changes in the European market catching the eye of investors. There’s also the expected boom from China’s municipal bonds.
The rapid increase of liquid currency-hedged ETFs, including the euro-hedged-Europe-tracking or the Japan-sans-yen-tracking that have exceeded expectations, obtaining attractive attention to foreign stocks is becoming easier for American investors in the global market.