Friday, August 20, 2010

Investors Fleeing Stocks With Cash Flow Lure JPMorgan

Investors are moving more money than ever before out of stocks and into bonds, widening a valuation gap and convincing JPMorgan Chase & Co. and BlackRock Inc. that now is the time to buy equities.

About $33 billion flowed out of funds owning U.S. shares this year even as the economic recovery sent free cash flow for American companies excluding banks to 6.8 percent of their market value. That’s the highest level compared with corporate debt yields since 1960, Credit Suisse Group AG data show. About $185 billion was sent to bond funds through July 31, the most on record, according to the Investment Company Institute.

The biggest money managers say concern the U.S. will slip into a recession is overblown and that individuals piling into fixed-income securities for their relative safety are making a mistake. David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds, says record low yields show there’s too much demand for bonds and aren’t a sign the economy is headed for the second recession in three years. (more)

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