US Economics Digest
Cash is Leaving Both Bond and Equity Funds
* Net new mutual fund cash flows are starting to get interesting after a relatively benign stretch in 2014 and the first half of 2015.
* Households typically use mutual funds to save for such long-term goals as saving for college or preparing for retirement. Many household investments into these funds are made through regular payroll deductions, which help steady the funds' net new cash flows, even during periods of market turbulence.
* When we do see unusual flows out of (or even into) mutual funds, we take notice. Such changes in retail investment behavior can help us identify inflection points in household attitudes toward risk.
* In this note, we review mutual fund cash flows from the financial crisis to the latest monthly data – through June 2015 – provided by the Investment Company Institute (ICI).
* Also, we observe that the latest weekly estimates from the ICI indicate these retail investment outflows began gaining strength in Q3 2015. Data to date suggest that we will see the first example of back-to-back monthly outflows from both equity and bond mutual funds (in July and August 2015) since Q4 2008.