By Trevor Hunnicutt
NEW YORK (Reuters) - U.S. fund investors cooled on domestic stocks during the latest week, pulling the most cash from the market in four weeks, Investment Company Institute (ICI) data showed on Wednesday.
Domestic stock fund flows sank to negative $5.5 billion during the week through Nov. 1, according to the trade group, as demand for equity exchange-traded funds (ETFs) petered out after two particularly strong weeks.
Investors added $7.4 billion to taxable bond funds and $3.8 billion to world stock funds, with each category garnering a 48th consecutive week of net inflows, ICI said.
The U.S. stock market has glided to new highs this year - with the benchmark S&P 500 up 17.6 percent, including dividends - but fund investors have remained cautious, favoring bonds and international stocks.
While fund investors have been lukewarm, managers are buying domestic stocks.
Bank of America (NYSE:BAC) Corp's survey of fund managers showed their cash balances falling to 4.7 percent, the lowest since May 2015, while their U.S. stock holdings rose.
"What's really driving markets at this point is momentum and people buying because the pain of continuing to miss out is just overwhelming," said Fritz Folts, chief investment strategist at 3EDGE Asset Management LP.
Stockpickers and other fund managers eager to show off their skills are piling into stocks that have already done well ahead of making year-end disclosures to clients of what they own, he said.
But Folts said bonds offer little respite from the stock market's excesses because they are "insanely overvalued," with the high-yield market in particular offering little value.
"You're just not getting compensated for the risk that you're taking," he said.