U.S. Investors Jump Back into Domestic Stock Funds as Market Rallies

U.S. investors jumped back into domestic stock funds during the week that ended Feb. 20 amid the best start to a year for the S&P 500 since 1987, breaking a five-week streak in which investors pulled money out of the rising market, according to data released Wednesday by the Investment Company Institute.

Overall, mutual funds and exchange traded funds that focus on U.S. stocks netted approximately $965 million last week, the first positive inflow for the category since the $6.6 billion in positive inflows during the week ended Jan. 9, ICI data showed.

Investors pulled a net of $22.5 billion out of domestic stock funds between mid-January and late February.

The benchmark S&P 500 is up approximately 11.1 percent since the start of the year, thanks in part to signs that the Federal Reserve is slowing its pace of interest rate hikes and a move by Congress to avoid another government shutdown.

The Russell 2000 index of small and mid-cap companies is up nearly 17 percent over the same time. The move into domestic stocks came at the expense of world stock funds, which with a decline of $1.17 billion suffered their first outflows since the week that ended Jan. 2.

Investors have sent approximately net $13.2 billion into world stock mutual funds and ETFs since the start of the year. An MSCI index of world stocks excluding the U.S. market is up nearly 10 percent for the year to date. Bonds funds and ETFs continued their seven-week stretch of positive inflows.

Taxable bond funds netted approximately $6.1 billion during the week, while municipal bond funds netted $2.4 billion.