Fund Investors Are Stressing Out

One way of tracking how individual investors are feeling about the stock market is to watch the flows into and out of mutual funds. TrimTabs Investment Research keeps an eye on this data. Remember August? A full-blown financial crisis hit credit markets and U.S. stocks fell rapidly from July’s record levels. In that month, about $15.5 billion was pulled out of equity mutual funds by investors, TrimTabs says. By now, those are looking like the good old days. Investors put money back into funds in September and October as stocks seemed to recover from the crisis. Then in November, stress levels started to rise again. Investors pulled out $10.88 billion in November, and then a whopping $28.83 billion left all equity mutual funds in December. That December figure was the highest in five years, since the end of the last bear market in 2002. New data released today by TrimTabs shows the outflows continue to mount at a rapid pace. As of Jan. 22, more than $43 billion has left mutual funds so far this month. What’s going on here? I have a theory after the jump.

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