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Business, Finance, Occupation & Industry

Investors Still Like Bonds, Even as Stock Market Surges

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By The Associated Press

dow jones stocks rally bonds

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Richard Drew/AP

By MARK JEWELL and MATTHEW CRAFT

Market pros call it the Great Rotation. That’s the long-awaited scenario when investors take their money out of bonds and sink it into stocks.

It was the buzzword this month when the Dow Jones industrial average (^DJI) reached a record high. The idea was that investors were confident enough in the economy to shed their financial crisis fears and leave the safety of bonds.

But it’s not happening.

Money keeps flowing into bonds. Industry consultant Strategic Insight says U.S. bond mutual funds have attracted $64 billion in cash in the first two months of the year, just below last year’s pace of $68 billion over the same period.

Stock mutual funds had net deposits of $76 billion through February, according to the consultancy. While that is up sharply from $14 billion a year earlier, the cash for stocks is not coming at the expense of bonds, according to more recent snapshots of investment flows.

Instead, investors are withdrawing from money-market funds, which are often used as a parking spot for cash, according to EPFR Global.

“The expectations of a big exodus from bonds are way overblown,” says David Santschi, CEO of TrimTabs Investment Research, a fund-tracking firm.

A stock market crash and recession have made bonds especially appealing since 2008, when the nation was in the throes of the financial crisis. The abundance of buyers has pushed bond prices up and sent yields lower, reducing interest payments to investors.

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Even with low yields, bonds will continue to attract retiring baby boomers and others who want reliable income for daily expenses. The yield on the 10-year Treasury note — a benchmark — is hovering under 2 percent. Other types offer higher yields. Investment-grade corporate bonds yield 3 percent and riskier “junk” bonds yield just under 6 percent.

Money-market funds, meanwhile, yield 0.02 percent.

Still, the Dow’s record surge is drawing more attention to stocks.

The blue-chip index broke through its all-time high March 5 and kept climbing. It’s up nearly 11 percent this year and 122 percent from its bottom in March 2009. The broader Standard & Poor’s 500 index (^GSPC) is up 9 percent and is close to breaking its own record.

Investors added $8 billion to U.S. stock funds and exchange-traded funds in February. And they’re putting in more cash this month, as $12 billion flowed into stock funds and ETFs through Tuesday, according to EPFR Global.

Bond funds, including ETFs, have pulled in nearly $8 billion this month.

Much of the money flowing into stocks and bonds has come out of money-market funds. About $32 billion has been pulled out of money funds this month, according to EPFR Global.

Withdrawals that didn’t …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Despite Stock Surge, Money Still Flowing Into Bonds

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By The Associated Press

Filed under: , , ,

Market pros call it the Great Rotation. That’s the long-awaited scenario when investors take their money out of bonds and sink it into stocks.

It was the buzzword this month when the Dow Jones industrial average reached a record high. The idea was that investors were confident enough in the economy to shed their financial crisis fears and leave the safety of bonds.

But it’s not happening.

Money keeps flowing into bonds. Industry consultant Strategic Insight says U.S. bond mutual funds have attracted $64 billion in cash in the first two months of the year, just below last year’s pace of $68 billion over the same period.

Stock mutual funds had net deposits of $76 billion through February, according to the consultancy. While that is up sharply from $14 billion a year earlier, the cash for stocks is not coming at the expense of bonds, according to more recent snapshots of investment flows.

Instead, investors are withdrawing from money-market funds, which are often used as a parking spot for cash, according to EPFR Global.

“The expectations of a big exodus from bonds are way overblown,” says David Santschi, CEO of TrimTabs Investment Research, a fund-tracking firm.

A stock market crash and recession have made bonds especially appealing since 2008, when the nation was in the throes of the financial crisis. The abundance of buyers has pushed bond prices up and sent yields lower, reducing interest payments to investors.

Even with low yields, bonds will continue to attract retiring baby boomers and others who want reliable income for daily expenses. The yield on the 10-year Treasury note – a benchmark – is hovering under 2 percent. Other types offer higher yields. Investment-grade corporate bonds yield 3 percent and riskier “junk” bonds yield just under 6 percent.

Money-market funds, meanwhile, yield 0.02 percent.

Still, the Dow’s record surge is drawing more attention to stocks.

The blue-chip index broke through its all-time high March 5 and kept climbing. It’s up nearly 11 percent this year and 122 percent from its bottom in March 2009. The broader Standard & Poor’s 500 index is up 9 percent and is close to breaking its own record.

Investors added $8 billion to U.S. stock funds and exchange-traded funds in February. And they’re putting in more cash this month, as $12 billion flowed into stock funds and ETFs through Tuesday, according to EPFR Global.

Bond funds, including ETFs, have pulled in nearly $8 billion this month.

Much of the money flowing into stocks and bonds has come out of money-market funds. About $32 billion has been pulled out of money funds this month, according to EPFR Global.

Withdrawals that didn’t go directly into stock or bond mutual funds could have gone into bank accounts, covered daily expenses or been used for other needs. Investors also …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Despite Surge in U.S. Stock Prices, Investors Remain Cautious

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By The Associated Press

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Five and a half years after the start of a frightening drop that erased $11 trillion from stock portfolios, the Dow Jones industrial average has regained all the losses suffered and reached a new high. (Richard Drew/AP)

By MARK JEWELL

BOSTON — The Dow Jones industrial average continues to set new records but average investors are still proceeding with caution.

While they added to U.S. stock funds in the first two months of the year, they put larger amounts into bonds and funds investing primarily in foreign stocks, according to mutual fund industry consultant Strategic Insight.

Investors recognize “that it’s necessary to spread one’s risk and wealth creation aspiration broadly and globally,” said Avi Nachmany, research director with the New York-based firm.

Net deposits into stock and bond mutual funds, both foreign and U.S., totaled $140 billion through the first two months of 2013, the firm said on Tuesday. That matches the record total for the first quarter of 2007. The year-to-date total for funds investing in U.S.-issued and foreign bonds is $64 billion. For U.S. and foreign stock funds, the total is $44 billion.

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For February, a net $6 billion was deposited into U.S. stock funds. While that was down from $26 billion the previous month, it represents a shift from 2012, when withdrawals exceeded deposits over the final 10 months of the year. In fact, cash had been pulled out of U.S. stock funds for six years in a row.

This year’s figures suggest that investors are beginning to become comfortable with stocks again following the financial meltdown and market plunge of 2008-2009.

Deposits into stocks helped push the Dow toward a record reached on March 5. And the index has climbed higher every day since. The Standard & Poor’s 500 index has risen nearly 9 percent this year and is just short of its own record.

Investors have been encouraged by strong fourth-quarter earnings reports, and by the Jan. 1 agreement between Congress and the White House to avert the worst effects of the so-called “fiscal cliff.”

Here are more details about how investors moved their money in February, according to Strategic Insight:

FOREIGN STOCK FUNDS: A net $22 billion was deposited into funds primarily investing in foreign stocks, matching the previous month’s total.

BOND FUNDS: Net deposits of $22 billion in February fell from $42 billion in January. Last month’s total came mostly from taxable bond funds. Those funds, which primarily invest in corporate bonds, attracted almost $20 billion. Nearly $3 billion was deposited into municipal bond funds, which invest in bonds issued by state and local governments. Net deposits into bond funds have topped $1 trillion since the 2008 financial crisis, including more $300 billion last year. Bonds typically generate smaller long-term returns than stocks, but with less chance of short-term losses.

EXCHANGE-TRADED FUNDS: …read more
Source: FULL ARTICLE at DailyFinance