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Stock funds shrivel for seventh straight week

Going with the flow

Sinking stocks can’t find a friend.

Money has flowed out of equity mutual funds and into bond funds for seven straight weeks, the Investment Company Institute said in its latest report on fund flows.

Stock funds suffered a net outflow of $1.8 billion in the week ended June 16, the ICI said Wednesday. That brings their total outflow since the market turned at the end of April to $35 billion.

The stock outflows of the past two months have almost reversed the net inflows of the rally months up to April. Stock funds took in $40 billion over the first four months of the year, as the S&P 500 index rose 9% to a 52-week high above 1200.

But since then, money has rushed out of stocks, and the pace of flows into bonds has slowed sharply. Bond funds took in $4.5 billion in the latest week, but that’s barely half the pace of their inflows during the first four months of the year.

All told, bond funds have taken in $136 billion this year, and stock funds $5 billion.

The widespread aversion to stock fund investing is another reason, stock market bears suggest, to expect a nervous market to keep retreating — or worse.

“As for the equity market, we are at a critical juncture and it could break any day,” Gluskin Sheff economist David Rosenberg wrote in a note to clients Wednesday.

Rosenberg has been calling for a crash for months, it might be noted. Still, he has been nothing if not consistent. He points to weak economic numbers, intense volatility and widespread skepticism among some longtime market watchers.

“Even if a double dip is avoided, the market is not priced for a growth relapse,” he contends.