So much for the January Effect—the traditional stock market rise driven by investor optimism for all that’s to come is nowhere to be found in 2016. In addition to the China meltdown and steep domestic market decrease, investors pulled $8.8 billion from international equities, with the first week of the New Year ringing in as the worst for equity mutual funds since September.
Citing data collected by Cambridge, Massachusetts-based EPFR Global, Bloomberg reports that the weakening of China’s currency rekindled concern that the country’s slowing growth would spread. Redemptions at U.S.-based stock funds hit at a 17-week high, with investors favoring funds that target Europe and Japan, where central banks have pledged continued support, data for the week ended Jan. 6 show.
“As was the case in early 2015, mutual fund investors tip-toed rather than sprinted into the new year,” Cameron Brandt, research director at EPFR Global, and his colleagues wrote in a report released Friday. “Their caution was quickly justified as another spasm in Chinese equity markets rippled through global stock exchanges.”
The news service noted the Standard & Poor’s 500 Index is on track for its worst-ever five-day start to the year and its worst weekly performance since the August equities selloff, while the MSCI All-Country World Index has plunged more than 5 percent this year. In the U.S., large-cap exchanged-traded funds saw the heaviest redemptions, according to EPFR.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
