The stock markets have enjoyed a steady rally over the last few months as investors abruptly dumped bond-related investments and exchange traded funds (ETFs) for riskier and better performing assets.

Beginning at around December, municipal, foreign and long-term Treasury bonds have all started to lose value while equities have experienced a high volume of inflows, writes Paul J. Lim for The New York Times. This change in investor trends indicates that people are becoming more confident in the health of our economic recovery.

Consumer confidence is high, companies are reporting solid fourth-quarter earnings and the economy is doing much better than it was before. IHS Global Insight recently revised upward its projection of U.S. GDP growth to 3.2% in 2011 year-over-year from its previous estimate of 2.4%.

Mark D. Luschini, chief investment strategist at Janney Montgomery Scott, remarks that investors who are now comfortable with higher investment risk in an improving economy will start looking away from bonds and into stocks, specifically blue-chips.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.