U.S. equity funds saw a record inflow of $40.3 billion in July, according to data from TrimTabs, as the S&P 500 and Dow Jones Industrial Average scale new heights in what some are calling an "invincible summer" for the country's stocks.
"Fund flows in the past two months were by far the most volatile we have ever measured. After ignoring equities and dumping bonds at a record pace in June, fund investors poured record sums into U.S. equities and continued to sell bonds in July," the investment research firm wrote in a report published late Sunday.
Fund investors ended their "love affair" with bonds this summer, pulling $21.1 billion out of debt mutual funds and exchange-traded funds (ETFs) in July, after record outflows of $69.1 billion in June. The outflows in June and July brought an end to 21 straight months of inflows.
If investors continue to dump bonds, sending yields higher, the Federal Reserve may have to re-think its plans for tapering, said TrimTabs.
According to the firm's research, more of the money that has come out of bonds is being held in cash rather than invested in the equity market.
In the eight weeks ended July 22, $110.9 billion went into savings deposits, while $32.5 billion entered into retail money market funds.