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Nicolas Colas, ConvergEx chief market strategist, on why investors are pulling out of mutual funds.
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And -- that comes in rather.
Actually -- Indy 500 is up more than 40% over the past three years.
In our next guest says investors continue to pull money out of stock mutual funds.
Even billions of dollars on the table joining us now -- nick colas chief market strategist with the Comverge X group.
-- -- -- the numbers are staggering so tell us quickly.
-- what's amazing is that you -- the stock markets have 40% to fairly reliable fashion from the bottoms three years ago.
The actual fund investors have taken out 347.
Billion dollars from US equity mutual -- the very asset class that's doing so well over the past three years why.
There's a combination of factors it's probably they just don't trust the volatility of the market that's very clear from the redemptions will be -- in 2007.
2009 various equivalent cuts in numbers.
But even as we've had a steady pace of improvement.
They're still worried about things like the flash crash eighteen months ago the word about various IPOs that we know knock -- so well they're worried about market structure issues.
And they're worried about their own pocketbooks worried about.
-- -- what's interesting is this months of this money has gone into bonds mutual funds and now.
I guess that maybe there's a lack of -- out there that bond funds can -- just is risky if not more because of interest rates.
Risk yeah you raise exactly the right point the SEC in a variety of other folks have done surveys of individual investors to ask do you understand right that when rates go up.
-- prices go down only two or three in 1020 or 30% investors really understand that she -- record right point bond funds are not risk free.
Because I think there's a misconception out there that the price and what the bond that is the price that -- -- it and it's locked in.
Nothing will change but that's just not trip.
That's representative bond funds are -- my -- -- where that price is gonna move round regardless that's Jonas single bond due Gephardt the end.
But that -- between now and then could be -- volatile but do you think it's also because I mean I look at my mom.
Her generation they grew up you put money in bonds and you -- I had an uncle who was 97 and I think you put GM bonds right before he died.
This is what that generation did.
Right it is an associate generation coming up now so folks -- -- 55 to 64.
Getting ready to retire are also thinking about reallocate it.
Some of that equity that they -- for the past twenty years -- some bond funds to give some income in retirement is the argument that there -- actually east equities that are safer than bond funds.
A lot of folks look for a dividend paying stocks.
I -- -- by frank ETF for single stocks that'll pay some dividends but again you're gonna susceptible to that stock market volatility the thing is though until these bond funds start to break down which no one is seeing happen anytime soon.
People are not gonna pull their money out of bond -- that's exactly right that behavior that we saw after these financial crisis shows us that when people see volatility.
The only response leaders so I think you're right Americans -- -- market volatility.
Before that money might come back to equities and and do we expect that anytime -- I -- fed keeps interest rates really low interest rates are haven't been moving at all much really that's right.
No I don't -- -- we're gonna see much volatility in the bond market through next year for all the reasons that you outlined plots.
It's still very sluggish very weak US economy -- it's a -- a lot of people not make -- my they shed.
Nick colas come Comverge ex chief market strategist thank you sir thank you.
