During Q2, the big-money managers who pool assets for all kinds of investors dumped the stock market for a third straight quarter, said David Kostin, Goldman Sachs' chief US equity strategist.
"Low levels of equity fund cash and significant outflows from mutual funds drive our mutual fund net equity purchases forecast of -$25 billion in 2016," Kostin wrote in a client note on Friday.
Mutual funds have suffered massive outflows in 2016. As of the end of September, mutual-fund domestic and foreign outflows totaled $156 billion, more than double the amount in 2015 and the most since 2008, according to Goldman.
The year started with warnings from across Wall Street that investors should expect modest returns from the stock market. Those concerns snowballed mid-year, when the UK voted to leave the European Union.
Despite weak earnings growth, stocks - measured by the benchmark S&P 500 index - have outpaced many early forecasts and gained nearly 6% this year. But there's still uncertainty around earnings growth, the presidential election, and the impact of higher interest rates.
Like mutual funds, foreign investors are fleeing the market, although their selling slowed to $46 billion of US stocks in Q2 from $108 billion in Q1, according to Kostin.
"We cut our 2016 forecast of foreign investor demand for US equities to -$125 billion from -$50 billion given lower-than-expected demand during 1H and weak US equity returns in the near-term," Kostin said.
"However, we expect a slight recovery in foreign investor demand in 2H compared with 1H given low global bond yields and the 3Q equity rally. Uncertainty surrounding the US election represents a downside risk to our forecast."