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Where The Investors Are and Are Not

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Investors flee money market funds, but they're not putting money into stock funds--yet. The Investment Company Institute, the professional association of the mutual funding industry, has released their monthly Trends Report with figures through June of this year.

Here's what stands out:

1) in June, money market funds had OUTFLOWS of $116 billion--that is a record for withdrawals in a single month (there's about $3.2 trillion in money market funds).

What did they do with all this money that came out? Some of them may have used the money to just pay bills, but one simple answer is that they put it into bond funds.

2) investors continue to pour money into those taxable bond funds, with $23 billion in inflows in June, $113.8 billion INFLOWS in the first half of the year (there's about $1.4 trillion in taxable bond funds)

3) What about stock funds? Despite a notable stock market rally in the first six months of the year (the S&P was up 1.8 percent, but up 36 percent from the March lows) , there were OUTFLOWS from stock mutual funds in the first half of the year of $396 million (there's about $4 trillion in stock funds).

What's up? Retail investors have been so badly burned by stocks last year that they still do not trust the market; they are showing classic signs of risk aversion by continuing to put money into bonds.

When will this turn around? Charles Biderman at TrimTabs says this will be a very strong week for inflows into stock mutual funds; whether this will be enough to reverse the trend longer term is unclear.

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