Stock Funds Hit Doldrums

Sat., July 27, 1996

Patricia Lamiell Associated Press

Investments in stock mutual funds slowed in June to about two-thirds the feverish clip set earlier in the year as the stock market rally showed signs it was peaking.

Figures released Thursday by the Investment Company Institute, the mutual fund business’ largest trade group, estimated that investors put $14.48 billion more into stock funds in June than they withdrew.

That is down sharply from $25.11 billion in May and well below the monthly average of $24.76 billion during the first five months of this year. Still, the monthly flows are nearly double last June’s $8 billion net inflow.

The retraction has continued in July, said Steve Nortwitz, a spokesman at T. Rowe Price funds in Baltimore, where stock funds “are still running a very positive cash flow in July, but down sharply from June.”

Noting the recent decline in stock prices, especially in small stocks and technology issues, investors are pulling money out of stock funds and parking it in money-market funds “until they see a trend,” Norwitz said.

From an all-time closing high of 1,249.15 on June 5, the Nasdaq composite is down some 15 percent, closing Friday at 1,079.44. From its all-time closing high of 5,778.00 on May 22, the Dow Jones industrial average is down about 6 percent, closing Friday at 5,473.06.

Still, there was no indication in the June figures that investors had pulled the plug on stocks. Investors’ tax refunds had already been deployed by June, and deadlines had passed for investing in individual retirement accounts and other retirement savings programs.

Year-to-date new cash into stock funds totaled $138.30 billion, far ahead of the $48.52 added in the first six months of 1995. Total assets of stock funds rose $2.12 billion to $1.53 trillion.

New cash flow into the entire mutual fund industry was $7.85 billion in June, down sharply from $29.85 billion in the previous month. Combined assets of all types of funds rose by $6.52 billion to $3.181 trillion.

Fixed-income funds did not appear to benefit from the pull-back from equities. Bond and income funds had a net outflow in June of $206.7 million, compared with a net gain of $302.9 million in May. But net assets of bond and income funds rose $4.76 billion, to $830.30, indicating that the value of the funds rose. Money market funds experienced an outflow of $6.43 billion in June.

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