According to research data released on Thursday, investors continued to increase bets into both the stock and bond markets over the past week.
U.S.-based stock funds generated $4.7 billion and taxable-bond funds produced $3.7 billion of the week ending on October 25.
Over the last few days, spikes were seen in rates of U.S. government debt and U.S. stocks most from third quarter earnings. But, the anticipation of the next Fed and debate over a tax plan in Washington also played a part.
The CBOE Volatility Index, an options-market gauge of expected price swings, increased to a high of 13.24 which has not seen since early September. On Thursday, yields on the 10-year U.S. Treasury note jumped to 2.45 from 2.06 in early September.
The changes in debt and equities brought a shock to the relaxed trading markets. But, fund investors maintained placing bets in stock and taxable-bond funds, although the average for both funds lost value in the week.
Tom Roseen, research analyst, believes that a high number of small investors remain apprehensive about elevated equity valuations and continue to invest in the high-yielding debt funds.
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Roseen added that investors are seeing healthy corporate profits that are justifying these elevated price gains. Nearly 74 percent of the S&P 500 companies that disclosed third-quarter earnings had reported surpassing profits expectations. The S&P index has gained 16 percent year to date, including dividends.
“People pretty much kept the pedal to the medal,” said Roseen. “How much longer can we go up? We need a pullback. We need a breather.”
Domestic-focused stock funds brought in $2.2 billion, which is the most seen since August. This included a $706 million influx for funds fixated on the financial sector. Banks and insurers are forecast to increase their earnings as rates increase.