U.S. stock funds set for record monthly withdrawals: Lipper

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 20, 2018. REUTERS/Brendan McDermid

NEW YORK (Reuters) - Investors fled U.S.-based stock funds in the latest week, setting those investments up for their biggest month of withdrawals on record, Lipper data showed on Thursday.

More than $80.7 billion poured out of U.S.-based stock funds during the 14 days through Dec. 19, representing about 1 percent of the total assets in such funds, according to the research service.

The selling continued during a week in which the U.S. Federal Reserve raised rates for the ninth time in about three years and reaffirmed its commitment to tightening monetary policy even as markets prepare for a slowdown in economic growth. U.S. stocks slid again on Thursday, with the Nasdaq Composite on the cusp of confirming it is in bear market territory. [.N]

If the withdrawals continue for the eight final trading days of the year, December will mark the biggest cash-out from U.S. equity funds on records that date to 1992, when the fund industry was far smaller.

“The central bankers are taking the punchbowl away and it’s not being well received,” said Stephen Blumenthal, executive chairman of CMG Capital Management Group Inc, an investment manager. “If we were having all these troubles and the market was ridiculously cheap it wouldn’t be as big of a problem.”

With the recent market declines, the S&P 500’s forward price-to-earnings ratio is now at 15.3, its lowest level since early 2016 but above its 15 longer-term average, according to data from Refinitiv.

Stock mutual funds heavily used by retail investors were responsible for the withdrawals during the latest week, with nearly $41 billion pouring out. Equity ETFs used more broadly, including by fast-trading institutions, attracted $6.4 billion.

Individual investors are the most pessimistic about stock performance they have been in more than five years, with 49 percent expecting the market to fall in the next six months, according to a survey by the American Association of Individual Investors.

The end-of-year fund sales numbers could also reflect changes related to capital gains distributions and as investors re-evaluate their holdings for tax reasons and other purposes, though in other years the volume has not been this high.

Reporting by Trevor Hunnicutt; Editing by Dan Grebler, Jennifer Ablan and Tom Brown