Investors Just Pulled $32 Billion From U.S. Stocks. Should You Be Selling, Too?

Investors just pulled more than $32 billion out of U.S. stock funds in a single week. It was the largest single-week outflow in nine months.

Inflation, high interest rates, a potential federal funds rate hike this week, and artificial intelligence (AI) development slowdown concerns could finally be damaging investor sentiment. The outflow numbers are huge. But fund flows tell us what investors are doing, not necessarily what stocks will do next.

Yet investor panic could soon drive stock prices lower. Should investors in the Vanguard S&P 500 ETF (NYSEMKT: VOO) and other U.S. large-cap ETFs consider reducing their exposure here?

I don't think so.

Image source: Getty Images.

Investors suddenly have a lot to worry about

The biggest immediate concern is oil.

Brent crude oil recently moved above $110 per barrel, raising fears that inflation and borrowing costs could rise as well. The 10-year Treasury yield is also approaching 5%, which it last touched briefly in October 2023. Markets are also pricing in the high likelihood of another Fed rate hike, which would be the first in three years.

That's a legitimate threat to stocks.

Higher oil prices can lead to higher inflation. Higher inflation can lead to higher interest rates. And higher rates can make today's S&P 500 valuations more difficult to justify.

Plus, AI could be emerging as a negative catalyst for the first time.

Leaders from several major AI companies are calling for a slowdown in development to address safety concerns. That's raising questions about whether the huge infrastructure spending boom, which has helped fuel the stock market rally over the past few years, is set to slow as well.

If AI spending slows dramatically, earnings forecasts for the big companies could begin getting revised lower.

But $32 billion in selling isn't a reason to sell VOO

Investors aren't selling stocks indiscriminately here. Much of the current selling is centered around large-cap funds. Small-cap funds are still drawing some interest, as are all-cap funds, such as the Vanguard Total Stock Market ETF (NYSEMKT: VTI).

As we've seen in stock market performance throughout 2026, this could be more about investor repositioning and rotation rather than a broader sell-off.

More importantly, corporate earnings (and forecast earnings) remain strong. For the S&P 500, growth is expected to be well into the double digits both this year and next, supporting the fundamental case for stocks. I'd keep an eye on how AI spending potentially changes, but this is a solid foundation to work with.

That's why I'm still holding on to the Vanguard S&P 500 ETF. I have another 10 to 15 years to go until retirement, and whatever happens over the next six months or so is still short-term noise. Trying to time the market probably does more harm than good.

If earnings continue to look good, I think the long-term case for U.S. stocks is still intact.

David Dierking has positions in Vanguard Morningstar Total Stock Market ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.