The global stock market downturn at the start of August led investors to retreat from equity funds, though some returned with caution later in the month.

Data from the funds flow specialist Calastone revealed that only £545 million was funneled into equity funds last month, a substantial decrease from the £2.19 billion invested in July and representing the lowest investment level since November.

During the initial days of August, global stocks faced intense selling pressure as troubling indicators emerged regarding the American economy. Reports indicated a significant decline in hiring and a rising unemployment rate for the fourth consecutive month.

These factors heightened concerns about economic growth in the United States and speculation that the US Federal Reserve, which maintained interest rates at a 23-year high of 5.25% last month, might have to intervene with rate cuts this month.

The disappointing economic data further dampened investor sentiment, already shaken by less favorable earnings reports from major companies like Amazon and Intel.

In a notable shift towards caution, Calastone reported that investors placed £593 million into money market funds in August, the highest amount seen in a year.

Despite experiencing £206 million in outflows from equity funds in the first three days of August, the situation quickly rebounded, resulting in more tempered inflow trends as the month progressed.

Edward Glyn, head of global markets at Calastone, noted, “Investors reacted strongly when global markets faced turbulence in early August. Although outflows converted to inflows as market conditions improved, investor confidence remains fragile.”

Glyn highlighted that the significant outflow of £510 million from UK-focused funds should be interpreted in this context. This figure, while more than doubling the outflows seen in July, still falls short of the average monthly outflows of £660 million recorded over the past three years.

Investments in global equity funds dwindled to £639 million, while those into North American equity funds were cut in half to £564 million. Similar trends were noted in other regions, with investments in European funds dropping 58% to £155 million and emerging market funds experiencing a 59% decline to £174 million.

Asia-Pacific funds faced their 16th consecutive month of outflows, with withdrawals nearly quadrupling to £184 million last month.

Glyn further remarked that current governmental sentiments regarding the UK’s economic status are unlikely to instill confidence among investors. He stated, “It’s not yet time to break out the champagne” for the recovery.

Additionally, a report from Fidelity International demonstrated a notable “classic shift towards safety” among clients, who reduced their investments in technology funds in favor of money market funds and more diversified defensive assets, reflecting a strategy to obtain broader exposure amid ongoing economic uncertainties.