(Bloomberg News) More money than ever is flowing to mutual funds that buy both stocks and bonds, a sign that individuals are starting to return to equities during the most volatile bull market since at least 1942.
About $18.6 billion was added to so-called hybrid funds last quarter, the most since the Investment Company Institute started tracking the data in 1984. The record flows show that while investors remain skittish after the worst financial crisis since the Great Depression, they want more equities after the Standard & Poor's 500 Index doubled since March 2009.
Europe's sovereign debt crisis and rising oil prices are spurring the widest price swings since 1942, providing investors with another reason to limit purchases after pumping 232 times more money into debt funds over the last two years. That's bullish to Fiduciary Trust Co. and Credit Suisse Asset Management, which say the doubts mean more money is available in what is already the biggest rally since 1955.
"It's a chicken step into the equity market," said Michael Mullaney, who manages $9.5 billion at Fiduciary Trust in Boston. "Very few investors, especially on the retail side, have been on board with this rally. That's why we think this market still has legs to run because one major investor still hasn't shown up to the party."
Occidental Petroleum
Mullaney said he bought Occidental Petroleum Corp. shares on speculation the oil producer will increase revenue and profits faster than other companies as energy demand rises. Analysts have boosted profit estimates for the current fiscal year at the Los Angeles-based company by 17% since Dec. 31 to $8.18 a share, according to data compiled by Bloomberg.
Stocks plunged today after S&P put a "negative" outlook on the U.S.'s AAA credit rating, citing rising budget deficits and debt. The S&P 500 dropped 19.66 points, or 1.5%, to a more than three-week low of 1,300.02 at 9:58 a.m. in New York.
Last week the index fell 0.6% after sales from Pittsburgh-based Alcoa Inc., the largest U.S. aluminum producer, trailed analysts' projections and jobless claims unexpectedly increased. Goldman Sachs Group Inc. and Apple Inc. are among more than 100 companies in the benchmark gauge of U.S. stocks scheduled to release results this week.
Profits for S&P 500 companies probably climbed 12% in the first quarter, the slowest pace since 2009, according to analyst estimates compiled by Bloomberg.
Fund Inflows