Stock funds take in more cash than two decades combined

If there’s a single stat to capture the insatiable appetite for stocks this year, it’s the sum of cash that went into equity funds.

Investors have poured almost US$900 billion into equity exchange-traded and long-only funds in 2021 — exceeding the combined total from the past 19 years — according to analysts at Bank of America Corp. and EPFR Global.

It’s a data point that underscores just how extraordinary and record-breaking this year has been. The combination of cheap money and an economy roaring out of the pandemic set the stage of an unstoppable rally, with frenzied retail trading and a lack of other good investment options adding fuel to the fire.

The rally has left U.S. stocks teetering at record valuations and even some Wall Street analysts, usually a bullish cohort, are turning bearish for next year.

For investors, the debate continues to be about how fast central banks will raise rates to combat sticky inflation, and how badly it could potentially erode economic growth.

One possible sign of skittishness: investors have pulled money from stock funds only twice this year, and the second time was in the past week. Equity funds had Us$2.7-billion outflows in the week through Nov. 23, according to Bofa.

The amount of money moving into the stock market dwarfed anything else this year. Bond funds attracted just US$496 billion and money market funds received about US$260 billion.

ETFS continue to be the product of choice. Stock ETFS absorbed Us$785-billion inflows this year, compared with about US$108 billion for long-only funds. Equity sectors that saw record investments in 2021 include financial, consumer, energy, materials, real estate and infrastructure. Tech and health care had their secondbest year.