Analysis: Big flows into U.S. stocks may be sign of things to come

Sat Jan 12, 2013 7:09am EST
 
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By Jed Horowitz and Jennifer Ablan

NEW YORK (Reuters) - The biggest weekly inflow into U.S.-based equities mutual funds in more than 11 years could be a sign that stocks are coming back into favor for a broad swath of investors after lawmakers avoided the fiscal cliff, some top money managers said.

"We are at an inflection point where, especially in the U.S., you'll start to see net inflows into equities," said Margaret Patel, senior portfolio manager at Wells Capital Management, which oversees $331 billion in assets. "The risk-taker will be rewarded this year."

In the week ended Wednesday, investors in U.S.-based funds poured $7.53 billion into stock mutual funds while exchange-traded funds investing in equities gained $10.78 billion in new cash, according to data from Thomson Reuters' Lipper service.

The inflow into U.S. stock mutual funds was the biggest since May 2001, and the $18.32 billion aggregate injection of money into equities funds was the biggest since mid-2008.

Separately, EPFR estimated that net inflows into global equity funds, including ETFs, in the same week hit $22.2 billion - the highest since September 2007 and the second highest since comparable data began in 1996.

Since the U.S. Congress agreed on tax hikes for the higher paid and averted the fiscal cliff on January 1, the S&P 500 stock index has climbed more than 3 percent. Last year, including dividends, it returned about 16 percent.

BROKERS LESS CONVINCED

An increasing appetite for U.S. equities is seen by major investors as a sign of rising confidence in the U.S. economy but also an indication of how few appealing alternatives there are given that money market funds yield virtually nothing and bond yields have sunk.   Continued...

 
An exterior shot of the New York Stock Exchange in New York December 20, 2012. REUTERS/Andrew Kelly