Dash for cash may be starting to reverse as stocks recover

Investors pulled $745 million from a Vanguard short-term bond ETF Tuesday

Jan 10, 2019 @ 10:52 am

By Bloomberg News

Ten days into January, there are signs that investors' appetite for cash, which surged last quarter, is easing, suggesting the stabilization in equities is starting to erode demand for safer investments.

Investors pulled a record $745 million from a Vanguard exchange-traded fund that tracks short-term bond investments Tuesday. While that's tiny compared with the $165 billion that flowed into money-market funds during November and December, it comes off the back of a renewed appetite for risky assets — global shares are up 8% since Christmas Day.

Cash investments have offered investors a degree of safety amid worries about a slowdown in global growth. While recession fears are overdone in the eyes of many, Goldman Sachs this week still recommended that investors lift cash allocations, which the bank's strategists described as historically low. November and December together marked the biggest two-month flows into money-market funds since 2008.

After a rocky 2018, U.S. stocks have rallied and bonds steadied as investors scale back their expectations for Federal Reserve tightening.

(More: Downturn puts spotlight on active management)

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