Nervous investors have pumped over $30 billion into fixed-income exchange traded products so far this year. Bonds have been favored over stocks in the risk-off market.
Of course, historical flow patterns reveal that fund investors are horrible market timers. There are worries that investors who have piled into bond funds could be hurt by rising interest rates or inflation.
There has been a “mad rush” into fixed-income ETFs the past year, says Paul Justice, director of North American ETF research at Morningstar. [ETFs Gather Over $4 Billion in May as Bonds Favored]
In mutual funds, over the same period, more than $115 billion has left equity funds, while $172 billion went into fixed-income funds.
“To me, these figures are staggering,” Justice wrote in the latest edition of Morningstar’s ETF newsletter. “What we are witnessing is a full-blown retreat from risky assets and into perceived stability.”
Investors have been bombarded with warnings about the dangers of rising rates, but Treasury yields continue to fall to record lows. Yields on the 10-year note recently dropped below 1.5%.