Can stock market's upward momentum be maintained?

Rising stock markets have not attracted extra money into funds, which is worrying the Saltydog analyst.

Funds under management fall in May

As part of our regular analysis we look at how the value of a selection of funds varies on a month by month basis.

We've selected the largest funds from each Investment Association sector; we currently include 470 funds which, at the beginning of May, were worth just over £561 billion.

During May, the amount invested in most sectors dropped. The exceptions were £ Corporate Bonds, Global & Global Emerging Market Bonds, UK Gilts and Index-Linked Gilts, and UK Smaller Companies.

The UK Smaller Companies sector saw the largest gain, up 3.4%, and was also the only equity-based sector to go up.

Overall, the total value of all of the funds in our representative sample dropped by 0.9%.

In most years there's a net inflow of money into funds. According to the Investment Association, the net annual inflows between 2009 and 2017 varied between £15 billion and £67 billion, with the largest inflow in 2017.

Last year was unusual in that there was a net outflow of £5.5 billion, and there was a further outflow during the first quarter of 2019.

Although stock markets around the world picked up during the first three months of the year, it's interesting that this did not attract money into funds. It suggests a lack of enthusiasm from investors.

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Since the end of April, we've seen markets fall and recover, and then fall and recover again. It's hard to tell where they will go next. Until the outflow of money that we've seen over the last 12 months starts to reverse, it's hard to have confidence that any upward momentum will be maintained.

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