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The U.S. stock market is up almost 20% this year, but investors have missed out on much of the rally in stocks: They've sold equities and piled into bonds and money market funds — effectively low-yield savings accounts — largely out of fear.
What's happening: Institutional money managers and retail investors around the world have pulled a net $140.6 billion out of equity funds in 2019, according to data from Lipper, which tracks $49.1 trillion of assets.
What it means: "People don't trust the stock market," Emily Roland, head of capital markets research at John Hancock Investment Management, tells Axios. "I'm more concerned about that than I am about the FOMO trade."
Details: Lipper's data shows a strong investor preference for safety, as investment grade and short-term government bonds have seen significant inflows, while risky high-yield — or junk — bonds have seen far less.
The returns have been just the opposite of the flows. MSCI's index of equity markets around the globe has risen 16.7% year to date, and MSCI's U.S. index is up 18.9%. High-yield bonds have delivered 9.5% returns for investors, according to Lipper, compared to investment grade bond funds, which have seen 6.2% return.
Between the lines: "This has been a very unloved bull market by investors,” Roland says. "That's another reason, though, maybe it has some legs left."
What's next? The second half of the year looks to present many of the same potential risks and possible upside as the first.
Go deeper: Global economic whiplash
Worriers have had good reasons to fret about the economic recovery.
In addition to being the longest economic expansion in U.S. history, a number of reliable recession warning indicators have been flashing in 2019. The latest is the New York Fed's recession probability index.
What they're saying: "In the past, every time since 1960 that this index has breached 30%, a recession followed," Morgan Stanley Wealth Management CIO Lisa Shalett wrote in a July 1 note to clients. It rose to 32.9% in June.
The Mexican peso fell as much as 1.3%, the biggest drop in 4 weeks, against the U.S. dollar on Tuesday after Mexican Finance Minister Carlos Urzúa resigned unexpectedly.
What happened: Urzúa sent a letter to Mexican President Andrés Manuel López Obrador (AMLO), in which he suggested members of the president's inner circle with "patent conflict of interest" had meddled in policy and that decisions had been made without "sufficient foundation."
Why it matters: AMLO had worried investors as a candidate with his fiery rhetoric and hard-left policy prescriptions. But his choice of Urzúa, along with other more mainstream officials, for his cabinet had helped soothe market angst.
Chewy was the latest stock to become a victim of its own success. In a familiar pattern for companies that have seen share prices skyrocket after their debut in public markets, a slew of analysts released largely upbeat ratings of the company, but warned that the stock may already be in overbought territory.
What happened: Shares of Chewy fell 4% on Tuesday after at least 7 analysts issued guidance, with 5 placing the equivalent of Hold ratings on the stock and just 2 recommending investors buy it, FactSet data shows.
Yes, but: The stock is still 50% higher than its $22 IPO price.
Tom Steyer. Photo: Steve Pope/Getty Images
Axios' Felix Salmon writes: Tom Steyer, who launched his presidential campaign Tuesday, was early to the hedge fund game and eventually became a billionaire. He founded Farallon Capital in 1986 and left Farallon at the end of 2013,
In general, there are two ways to become a billionaire hedge fund manager.
The bottom line: One of Steyer's greatest successes is that Farallon is still a top-20 hedge fund 6 years later. Steyer wasn't some lightning-in-a-bottle individual genius. Rather, he managed to build an institution that would outlast him.