S&P 500 closes in on record -- with no help from individual investors

The Standard & Poor’s 500 is pushing ever closer to record territory -- but with little help from small investors.

The index is within five points of an all-time record after rising Thursday morning. As of 9 a.m. PDT, the S&P was up 5.99 points, or 0.4%, at 1560.61. Its record closing high is 1,565.15.

But after rushing into stock funds of all sorts for most of the first two months of the year, individuals have pulled back from U.S. equity funds in the last two weeks.

Investors withdrew a net $578 million from domestic equity funds last week, after yanking $1.1 billion the week before, according to the Investment Company Institute, a mutual-fund trade group. Overall stock flows have remained positive because investors have continued to stuff money into foreign funds.

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It’s not surprising that fund flows have turned negative for U.S. stocks, but it is potentially troubling for the market.

Investors traditionally pour money into the market at the beginning of the year as they allocate year-end bonuses and make various tax-planning moves. But the inflows often peter out once those investments are made.

Wall Street hoped that this year would be different, with investors excited about the strong stock market and brightened economic outlook.

The positive spin on this early trend is that individuals are cashing in some of their holdings with the U.S. stock market near all-time highs.

The negative interpretation is that outflows from stock funds could hold the market back as the year goes on.

It’s too soon to tell which is true.

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