Chart of the Day: Throwing in the Towel
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- Published on Tuesday, 03 July 2012 01:00
- Written by Adam English, Associate Editor, Inside Investing Daily
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If you're in the same boat as many small investors, June wasn't a fun month.
Daily share volume plunged to 6.8 billion shares a day across U.S. markets and valuations are 16% below the 50-year trend.
The S&P 500 moved an average 1% per day in June. It's a big change from the beginning of the year. The first quarter of 2012 had a 0.5% average change per day.
The candlestick chart and one-day rate of change shows the chaotic shifts over the past month.
Outside of an outright plunge in the market, few conditions are as frustrating as a volatile market for retail investors. The big players can push volume and make money from tiny price changes. The rest of us are stuck on a roller coaster.
Of course, that assumes people are even willing to stay in the market. Evidence is piling up that many people are staying on the sidelines for now.
"A lot of investors are just frozen, unsure what to do, so they do nothing," says Howard Ward of Gamco Investors Inc. "There are no raging bulls looking to leverage up on margin and risk their savings. Everyone is cautious, with some more so than others."
That would explain why mutual funds that invest in U.S. equities saw $1.8 billion in outflows for the week ending June 20 and $620 million in the previous week according to data from the Investment Company Institute.
Over the past three years, $300 billion has been pulled from the market. More than $190 billion has been taken out of American equity funds in the 13 months through May, while more than $200 billion has gone into bonds.
Midsummer trading normally sees less volatility and volume than the rest of the year. If June is an indicator for the rest of the summer, we won't have much of a chance to relax on vacation.