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Investors dumped equities in April fastest in 17 years, 
Global investors pulled the most out of stock funds in April since at least 1996 when records began. Equity funds posted net redemptions of $18.6 billion through to April 25th, according to data from EPFR Global. The shift out of equities has been a long-term trend since the global financial crisis of 2008, despite the subsequent rally that took stocks above pre-crash levels. Mutual funds that buy US stocks suffered withdrawals of $121 billion in the year to end of March, reported Morningstar, while bond funds recieved $191 billion over the same period. Bonds up Indeed, it is to bond funds and cash deposits that investors are consigning their money. Precious metals have seen prices reach all-time highs in the past 12 months followed by a track sideways. The question doubtless to be posed today at the Dubai Multicommodities Centre’s Precious Metals Conference is whether something is about to happen to restore investor enthusiasm for gold and silver as an investment class. However, the consensus view at the moment is that near term declines in stock markets are likely, with the election of socialist French president one obvious catalyst. And when money comes out of stocks it generally flows into bonds and that strengthens the dollar and weakens the value of precious metals that are in anycase likely to be sold off to meet margin calls. Bond crisis coming Could anything be wrong with that view? Well it must be somewhat compromised by the problems in the eurozone bond markets where interest rates are rising and bond prices falling. If France looks like becoming the new Greece then there will be flight out of bonds, and into what? US assets are one option but then the US presidential election is on the horizon and the good times cannot last for much longer. US bonds also look way overvalued and the exit of savers from US equities hardly shows much confidence in this asset class, with just the money printed by the Fed inflating prices. Anybody must admit it is hard for stocks to rally when savers are dumping equities at the fastest in 17 years. So that would leave gold and silver as asset classes for wealth preservation in a larger eurozone sovereign bond crisis, and at the same time the Chinese middle class are also buying precious metals as protection from their rapidly imploding economy. Investors sat on gold and silver should hold on, the good times for them could just be starting.
His book about ameinfo.com, ‘Opportunity Dubai: Making a Fortune in the Middle East’ was No.1 in The Daily Telegraph Book Club for six months. An Oxford graduate in politics and economics, Cooper spent a decade in London as a financial journalist specializing in real estate and construction. He is also the author of ‘Dubai Sabbatical: The Road to $5,000 Gold’. Thanks are also due to the many investment gurus and analysts who support and contribute to arabianmoney.net, not all of whom want their names known. ArabianMoney is also delighted to present video interviews with some of the most famous investors and financial experts on a regular basis. We would also like to thank our excellent webmaster and design team from Indivirtual led by Adam Cukrowski and Gijs Edelbroek in Dubai and part of the global group based in Amsterdam from where ArabianMoney.net is hosted. |
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Arabianmoney.net editor and publisher Peter Cooper is based in the Dubai Media City, and has been working as a senior journalist in the region since 1996. He was then the founding editor of the Gulf Business, the first-ever business magazine published in Dubai. In the year 2000 he was a founding partner in the business news and information website ameinfo.com.