With rising interest rates come lower bond prices. So it should come as little surprise that investors are fleeing bonds right now.
In fact, according to the latest long-term mutual fund flow data from the Investment Company Institute, investors continued to flee bonds en masse last week and have pulled out over $32 billion from bond funds over the last 3 weeks:
(Keep in mind that these figures are for mutual funds only. Perhaps ETF gurus Eric Dutram and Neena Mishra can give us some insights into ETF flows.)
What's interesting is that while investors are fleeing bonds right now, most of them are not putting that money into stocks, as you can see in the chart above. My guess is that they're just sitting in cash for now until rates stop climbing.
But when do you think we will start to see positive inflows back into bonds?
A. Very soon. Investors overreacted, and the recent trend will reverse.
B. As soon as interest rates show more stability. Investors need to know they won't get burned first.
C. Not until QE officially ends and interest rates have "normalized".
D. Not for a long, long time. The bull market in bonds is over.
Chime in below!
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