“The good news is that this previous panicky phase in retail investors’ behavior appears to be behind us,” they said.
In fact, last week, retail investors slowed their pace of selling bond funds and even began to buy equity mutual funds for the first time since early February. The analyst team calculates that individual investors are underweight equity funds.
There’s a similar pattern in money-market fund flows. Investors have stopped pulling money out of prime funds, and the rush into government money funds has peaked, the analysts wrote.
Now there’s about $1.5 trillion of cash on the sidelines, the analysts reckon. “In our opinion, this $1.5 trillion is likely to gradually re-enter bond and equity markets as retail investors continue to normalize their behavior and cover their equity underweights.”
The emphasis may be on “gradually.” Individual investors may have moved their money out of risk assets to be tactical, like institutional players did.
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