According to John Authers and Kate Burgess of CNBC public pension funds have lowered their allocations to stocks over the past 10 years from 70% to 52%. Since 2007 individual investors have pulled money out of stocks each year so that net flows for mutual funds are negative 5 years in a row. That’s especially interesting because of the steady inflow of 401k contributions. Over the same span investor allocations to bond funds have increased each year.
The reasoning is simple. People are afraid of the volatility in stocks during 2008 – 2012 and see economic problems in Europe and a very slowly recovering economy in the US. They want more certainty and so they favor the simplicity and income of bonds.
In addition, Europeans are selling not only their stocks but their holdings in the US as well. You can see that in the sharp drop that seems to start every stock trading day the last few weeks.
The economic issues are not likely to be resolved in the next year or so and in fact could get worse so I don’t see this trend reversing soon.