Investors pulled the most money from global stock funds since 2008 in the past week as the Standard & Poor’s downgrade of Treasuries and the deepening European debt crisis prompted a flight into cash and gold.
Funds that buy global equities suffered $3.5 billion in net withdrawals in the week ended Aug. 10, the most since the second week of October 2008, according to Cameron Brandt, director of research at Cambridge, Massachusetts-based EPFR Global. Investors removed $11.7 billion from funds that invest in U.S. equities, the most since May 2010 when investors pulled money following a one-day market crash that briefly erased $862 billion.
“This week had a feeling of capitulation as we saw investors running for cover,” Brandt said in a telephone interview. “The last time we saw this kind of flight to safety” was in 2008, he said.
Investors have rushed into money-market funds and gold as global equity markets lost $6.8 trillion in value since July 26. On Aug. 5, S&P downgraded U.S. debt for the first time, sending the benchmark Standard & Poor’s 500 Index down by 6.7 percent on the first trading session after the move. In Europe, riots swept across Britain and the sovereign-debt crisis deepened in the countries that use the euro.
Earnings at asset-management firms will be cut by 5 percent to 15 percent in 2012 as a result of investors’ reaction the market selloff, Daniel Fannon, an analyst with Jefferies & Co. in San Francisco, wrote in a note to clients today.