In a sharp contrast from the first quarter euphoria in the equities market, investors have dumped stocks over the second quarter in favor of fixed-income assets and exchange traded funds as economic tensions mount.

According to a State Street Global Advisors research note, all major equities indices were in the red over the second quarter, with the international developed MSCI EAFE Index leading the losers at a 13.2% drop, followed by the international small-cap S&P Developed Ex-U.S. Under USD$2 Billion Index with a 12.5% decline and the MSCI Emerging Markets Index falling 12.3%.

In contrast, the Barclays U.S. Government Inflation-Linked Bond Index added 4%, followed by U.S. Treasuries rising 3.2% and the Barclays Corporate Index increasing 2.0%.

Unsurprisingly within the ETF universe, the funds with the largest inflows were those tracking government and corporate debt. Government bond ETF added $3.9 billion and corporate bond ETFs attracted $3.4 billion. Meanwhile, international and emerging market stock ETFs lost $4 billion and high yield bonds dropped by $976 million.

At the beginning of the year, the equities market reacted positively to the better-than-expected news as economists and strategists were overly bearish heading into the new year. However, SSgA does not believe the markets will give future outlooks much leeway if it becomes worse-than-expected.

“It seems that markets had been comfortable reacting positively to economic news that had been better-than-expected, but it may not behave as well with neutral or even negative news going forward,” David B. Mazza, strategist, SPDR ETF Strategy & Consulting, SSgA, wrote in the note.

For more information on the ETF industry, visit our current affairs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.