Some Investors Don’t Trust This Stock Rally
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Here's your Money Briefing for Tuesday, February 14th. I'm J.R. Whelan for The Wall Street Journal. After your stock portfolio or 401k took a beating along with the rest of the stock market for most of 2022, we've seen markets bounce back in the first month and a half of 2023. That may seem like markets might have turned a corner, but investors seeing the big picture aren't so sure.
There are some fears that market sentiment could be turning. The enthusiasm that's been in the markets so far driving this 2023 rebound, a lot of folks are wondering how long can it really last?
Coming up, we'll talk to Wall Street Journal markets reporter Hannah Miao about what's driving that fear and how investors are pulling their money from funds that benefit from a rise in U.S. stocks. That's after the break.
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The S&P 500 is up about 7% since the start of the year, but many investors have their doubts about the trajectory of the market going forward, and they're pulling money out of funds that track U.S. stocks. So where are they putting that money, and what is it about the U.S. stock market that has them concerned? WSJ Markets reporter Hannah Miao has been talking to investors, and she joins me with more. Hey Hannah, thank you very much for being with us.
Thanks for having me.
So Hannah, to what degree are investors pulling money out of these funds?
Investors have pulled a net $31 billion from U.S. equity mutual funds and exchange-traded funds in the past six weeks. That's according to the latest data from Refinitiv Lipper. That's the longest streak of weekly net outflows since last summer. It's the most money pulled in aggregate from domestic equity funds to start a year since 2016.
What are some examples of funds that track U.S. stocks?
The largest US stock ETF is the SPDR S&P 500 ETF with the ticker SPY. That tracks the S&P 500 index passively, and it's what a lot of investors use when they want to get exposure to the broad US stock market. Money managers also often offer mutual funds or ETFs that track the S&P 500 or other US stock indices. And of course, there are actively managed mutual funds or ETFs made up of US stocks.
All right. So what is it about the current market that's causing investors to make those moves?
U.S. stocks since the beginning of the year have really rallied from a pretty tough year in 2022. And some investors haven't been buying the rebound. A lot of the rebound year to date has been about enthusiasm that the Fed might cut interest rates later this year. And some people really don't think that will happen. And so even though the S&P 500 is up some 7% this year, last week, the S&P 500 actually fell about 1%. That was the first week it had losses in the whole year. And so there are some fears that market sentiment could be turning. The enthusiasm that's been in the market so far driving this 2023 rebound, a lot of folks are wondering how long can it really last?
But all we've been hearing about are indications from the Fed that they may not have to continue an aggressive path with raising interest rates.
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