Fund investors ignore "accelerating" corporate profits, buy bonds

NEW YORK (Reuters) - Fund investors snorted at record U.S. stock prices during the latest week, pulling the most cash from domestic equities since August, Investment Company Institute (ICI) data showed on Wednesday.

Domestic equity funds posted $9.3 billion in withdrawals during the week ended Sept. 27, while international stock funds reeled in money for a 43rd straight week, the trade group said. World stock funds pulled in $2.9 billion during the week, lower than their $4.6 billion-a-week average this year. The data covers mutual funds and exchange-traded funds based in the United States.

Investors are ignoring the fact that corporate earnings have been “accelerating,” according to Richard Bernstein, chief executive officer at Richard Bernstein Advisors LLC.

“The whole discussion - even to some extent the political discussion - is ignoring how strong corporate profits have been. With the way the political conversation is going today you’d think corporations are suffering,” he said.

S&P 500 .SPX earnings have grown, year over year, for the last 11 quarters, according to Thomson Reuters I/B/E/S, and are expected to continue that trend as companies start reporting third-quarter earnings this month. The S&P 500 charted a record high again on Wednesday. [.N]

Yet bonds have been far more popular with fund investors. U.S.-based bond funds have brought in more than $2 for every $1 gathered by equity funds this year, according to data from Thomson Reuters’ Lipper research unit.

“The bond market is outrageously speculative,” said Bernstein.

“I don’t understand why people think the bond market is safe and rational these days. I don’t buy it for a second.”

Bond funds pulled in $6.7 billion during the latest week, adding a 40th straight week to their inflow streak, ICI’s data showed.

Reporting by Trevor Hunnicutt; Editing by David Gregorio