U.S. Stock Funds See $345.6B Outflows as Investors Shrug Off Tariffs
U.S. stock market funds experienced a significant shift in the third quarter, with investors pulling out $345.6 billion. Meanwhile, international-stock market funds attracted $27.8 billion, and bond funds saw inflows of $213.8 billion. Analysts caution that October may bring stock market volatility due to high valuations and record stock prices.
Despite the net withdrawals, U.S. stock market funds have gained an average of 7.2% in the third quarter, pushing year-to-date returns close to 11%. Large-cap growth funds, led by tech giants like Nvidia and Meta, have surged 15.2% this year. Large-cap value funds have also performed well, rising 12.9%. The strong performance is attributed to earnings growth, rate cuts, and enthusiasm about AI development.
International-stock market funds have outperformed their U.S. counterparts, climbing 17% year-to-date. Bond funds have advanced modestly, reflecting investors' cautious stance. Morgan Stanley's Institutional Growth Portfolio and Morgan Stanley Insight led the 12-month winners with impressive returns of 72.4% and 70.2%, respectively.
Despite recent net withdrawals, U.S. stock market funds are on track for a third consecutive year of double-digit gains, although the pace has slowed from the robust growth seen in 2023 and 2022. Investors remain cautious, with markets shrugging off tariff concerns and bond funds attracting significant inflows. As we head into October, analysts warn of potential stock market turbulence due to elevated valuations and record stock prices.
