January 3, 2019 / 11:35 PM / 15 days ago

U.S. stock funds post record December withdrawals: estimate

A trader looks at price monitors as he works on the floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., January 3, 2019. REUTERS/Shannon Stapleton

NEW YORK (Reuters) - Investors pulled $98 billion from U.S.-based stock funds in December, a calendar-month record that emphasizes the diminishing goodwill in financial markets, preliminary Lipper estimates showed on Thursday.

Fund investors trimmed their risk in the final days of 2018 to hunker down in case the Federal Reserve is too aggressively tightening monetary policy ahead of an economic slowdown and as the United States and China spar over trade. Some people see recent equity declines as a buying opportunity and are stockpiling cash to take advantage should prices fall further. The S&P 500 fell 9 percent last month.

“I used to feel comfortable saying we’re not headed toward an economic recession or an earnings recession - that means we’re in a correction, not a bear market,” said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York. “It’s getting harder and harder to do that, and with the Apple news today it’s getting even harder.”

Apple Inc warned on Wednesday about weak iPhone demand in the holiday quarter due to slower sales in China, foreshadowing similar problems for other companies in the coming earnings season. The widely owned company’s shares fell nearly 10 percent on Thursday.

December’s withdrawals easily top the prior record, when investors yanked $48.8 billion from U.S. stock funds as Congress and then-President George W. Bush tried to stop banks failing in October 2008.

Yet, while elevated, the monthly withdrawals amount to about 0.8 percent of the nearly $12 trillion of U.S.-based stock mutual fund and exchange-traded fund (ETF) assets tracked by Lipper, a research service. That data may be revised in coming days as more fund companies report their results.

During the most recent week, ended Jan. 2, investors pulled $18.7 billion from stocks and $13.3 billion from bonds, according to Lipper. Money market funds, where investors park cash, attracted $6.1 billion for the week and $122 billion in December, the preliminary numbers showed.

In a break with most recent weeks, both mutual funds and ETFs sold stocks at the same time during the latest seven-day period. ETFs, used heavily by institutional investors, had bought a net $9 billion in stocks in December. Mutual fund investors have sold stocks for the last 28 weeks.

Reporting by Trevor Hunnicutt; Additional reporting by Caroline Valetkevitch; Editing by Leslie Adler and Lisa Shumaker

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