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Illustration: Rebecca Zisser/Axios

The U.S. stock market is up almost 20% this year, but investors have missed out on much of the rally. 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.

  • The "Twilight Zone" environment, in which equity prices have risen despite net selling of stocks by investors, is taking place all over the world.
  • Investors have bought bonds — a net $255.5 billion so far this year — even though more than $13 trillion of bonds currently hold negative yields, meaning investors lose money by holding them.

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."

  • "We're seeing everybody embrace safety, which is fine, but from a long-term investing diversification standpoint, it doesn't end up working in your favor."

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.

  • Safe short-dated government bond funds have returned 2.4%, year-to-date, data shows.
  • Investors also have invested a net $148.6 billion into money market funds that collectively yielded less than 1% this year.

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

Go deeper

1 hour ago - Science

COVID time warp

Illustration: Sarah Grillo/Axios

The start of the COVID-19 pandemic seems like a lifetime ago to some, and just yesterday to others. Scientists are beginning to unpack the way people processed the passage of time amidst the stress, uncertainty and isolation of the 1 year, 8 months and 21 days since WHO declared a pandemic.

Why it matters: The pandemic's global effects on how people experience time could provide new insights into the brain's ability to perceive and predict time — a fundamental feature of life.

Mitt Romney calls Ray Dalio's China investments a "sad moral lapse"

Sen. Mitt Romney walks to a Senate Republican caucus meeting at the Capitol on Oct. 7. Photo: Stefani Reynolds/Bloomberg via Getty Images

Sen. Mitt Romney (R-Utah) on Thursday criticized billionaire Ray Dalio's investments in China, writing in a tweet that "his feigned ignorance of China's horrific abuses and rationalization of complicit investments there is a sad moral lapse."

Driving the news: Romney's comments come after Dalio's firm, Bridgewater Associates, the largest hedge fund in the world, raised $1.3 billion in November for a new private fund in China, Bloomberg reports.

Updated 3 hours ago - Politics & Policy

Omicron dashboard

Illustration: Aïda Amer/Axios

  1. Health: First known U.S. case of Omicron variant identified in California — America probably won't lead the effort to understand Omicron — CDC prepares tougher testing rules for international travelers.
  2. Politics: Omicron travel bans are sign of what's to come — Meta removes accounts linked to COVID disinformation effort by China.
  3. Vaccines: Omicron adds urgency to vaccinating world — Omicron fuels the case for COVID boosters — Moderna loses patent battles tied to COVID vaccine.
  4. World: Germany approves new restrictions for unvaccinated people — Omicron variant detected in more countriesWHO advises people 60 or older to postpone travel due to Omicron
  5. Variant tracker: Where different strains are spreading.

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