The equities markets showed signs life in January and individual investors responded enthusiastically.
The number of trades at discount brokerages was up 30% last month, according to The Wall Street Journal, while Lipper of New York reported that investors sunk about $22.5 billion into U.S. and international stock funds in January.
San Francisco-based Charles Schwab, for instance, witnessed $4.5 billion flow into its stock mutual funds in January. That's the most activity Schwab has enjoyed since 2000, when investors poured in $4.7 billion.
Activity was robust elsewhere, too, although many of the numbers aren't made public.
The Smith Barney Consulting Group at Citigroup in New York said flows into the stocks of its fee-based managed accounts in January were "substantially" higher than last year. St. Louis-based broker Edward Jones said new accounts were up by 11% versus last January, while Fidelity Investments in Boston reported that flows into stock mutual funds was $5.6 billion last month, versus $400 million a year ago. Newark, N.J.-based Prudential Financial, however, was among the firms that did not report significant gains.
So far this year, the Dow Jones Industrial Average is up 3.92% and it is giving investors confidence, The Journal observed. But they're also turning to equities because the Federal Reserve has been hiking interest rates, which makes the bond market less appealing. The housing boom is cooling, too, so investors are moving their money out of the previously red-hot real estate market.
According to Lipper, the preference among investors is to growth funds, which brought in $6 billion in January. That's the category's highest mark since 2001. Value funds, meanwhile, managed just $100 million in new money last month, a sign that investors probably agree with analysts in their assumption that value's dominant run in recent years is likely over.
Lipper also indicated, however, that large-cap remained out of favor, as investors put $700 million into small caps and $1.4 billion into mid-cap portfolios. International funds also remained popular in January.