Investors piled into cash-equivalent, money-market funds over the last week, making the asset class more popular than bond and equity funds for the first time in 25 years, new data shows.
Some $17 billion was pumped into cash funds in the week to Wednesday, while $3.3 billion where pulled out of stocks through ETFs and mutual funds, according to research from Bank of America Merrill Lynch and EPFR Global published Friday.
Meanwhile bond funds saw just $400 million in inflows over the same period, meaning cash is outperforming both asset classes this year for the first time since 1990, the data reveals.
Money market funds invest in very short-term, liquid debt such as U.S. Treasurys and offer investors low volatility, meaning they are often thought of as a cash-equivalent.
Corporate bonds saw their twelfth straight week of outflows, with safe-haven Treasury bond funds picking up some of the slack.
Global chief investment officer at UBS Wealth management, Mark Haefele has cut his U.S. high-yield corporate bond position this month, having been overweight the asset class since the end of 2011.
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"Recent market moves have investors questioning the efficacy of quantitative easing's (QE) upside impact on equity markets. Markets are likely to remain fragile in anticipation of economic growth data that are still a few weeks away," Haefele said.
"We have made one change to our tactical positioning this month: A downgrade in U.S. high yield from overweight to neutral.
"This position, which has performed well since initiation in 2011, no longer offers an attractive risk-adjusted rate of return. An increase to our equity overweight position is under consideration, but we need to see a reduction in market volatility and evidence that developed market economies are stable before taking action," he added.
Overall, Haefele is still overweight equities, in anticipation markets will move higher in the next six months.
As well as sticking to cash, investors pulled $7.4 billion from the State Street's SPDR S&P 500 ETF, the world's largest ETF.
BofA ML said bearishness on financial markets had peaked at levels not seen since October 2011, which they said is a contrarian "buy" signal for investors.