New York – Mutual-fund investors who held their ground after the stock market’s late February pullback didn’t have to wait long to see the wisdom of their decision.
With the Dow Jones industrial average skating past the 13,000 mark little more than six months after first hitting 12,000, investors were reminded that while volatility is by its nature jolting, it can also prove fleeting. Peppered with a few fits and starts, the Dow’s run-up from 12,000 has been rewarding to unflinching investors.
There wasn’t a mass exodus from the market, but not everyone was comfortable enough back in February to wait and see.
“We saw some people starting to think about ‘Should I take out some of my gains?”‘ David Darst, chief investment strategist at Morgan Stanley’s Global Wealth Management Group, said of investors’ reaction to the stock market’s Feb. 27 decline. While he encouraged investors not to panic after the pullback, Darst said he didn’t see too much bargain hunting in the immediate aftermath, signaling some lingering unease.
But mutual fund investors moved past their discomfort, returning in force. Inflows at six large mutual fund families rose 14 percent to $15.9 billion in March compared with a gain of $13.9 billion in February, according to fund tracker TrimTabs.
TrimTabs’ sampling found that U.S. equity funds drew more new money than global equity funds in March for the first time since July.
So far this month, overall fund flows beyond just the six big firms are down about $3 billion; the month often sees outflows, however, as investors rush to file taxes.
The March inflows came after the Feb. 27 pullback, which shaved more than 3 percent off major U.S. indexes. The selloff followed a nearly 9 percent drop in the volatile Shanghai Composite Exchange that day. Besides observing the pullback abroad, U.S. investors were grappling with concerns about the housing sector, consumer spending, the strength of the dollar and the overall economy.
The S&P – at a 6 1/2-year high – has been advancing toward its high of 1,527.46, which it set March 24, 2000, amid the dot-com bubble.
Darst says if the S&P can join the Dow in carving new highs, the pullback seen at the start of the decade begins to resemble more of a large correction. “If it cannot make that 1,527, you know that it’s a negative,” he said of the S&P, used by many investors as a broader benchmark than the Dow.
