The past two weeks have underscored a rapid shift in U.S. investor behavior, with money moving decisively into bond and money-market funds as jitters ripple through the banking sector. This renewed preference for safety and yield signals a broader reallocation from stocks into lower-risk assets, a trend that Goldman Sachs Research says has been gathering pace this year. As yields rise, the old conviction that stocks are the sole viable long-term option appears to be giving way to a more nuanced landscape in which investors consider a broader set of reasonably attractive alternatives. This reshaping of portfolios comes at a moment when two-year U.S. Treasuries are yielding around 4%, up markedly from roughly 2.4% a year ago, highlighting the changing risk-reward calculus faced by households and other market participants. The year-to-date flows into money-market and bond funds thus reflect not only a reaction to near-term stress but also a broader reorientation away from equities toward the more stable, yield-bearing alternatives that have gained prominence in a higher-rate environment.
Shifting Flows into Bond and Money-Market Funds
Over the most recent two-week span, inflows into bond funds and money-market funds intensified, driven in part by renewed concerns about the stability of the banking system. This acceleration in cash allocations to lower-risk, yield-bearing assets comes as households and other investors reassess risk and return profiles in a landscape where liquidity and safety carry renewed importance. The data, tracked and analyzed by Goldman Sachs Research, show a clear tilt toward assets that offer yield with a lower risk of principal loss relative to equities.
A striking data point during this period is the substantial weekly inflow into U.S. money-market funds, with about $136 billion poured in last week. This figure stands as the fourth-largest weekly inflow into money-market funds since 2007, according to Goldman Sachs Research strategists. The preceding week saw $116 billion enter these funds, underscoring a persistent, elevated demand for short-duration, highly liquid investments. The magnitude of these flows underscores a broader preference among households for assets that preserve capital while delivering a tangible yield, particularly when concerns about banks and credit risks among riskier assets intensify.
Longer-run behavior evident in the data also points to a structural shift in asset allocation. Even prior to the latest banking-sector stress, households have shown a growing appetite for lower-risk, yield-bearing instruments. In the current environment, households have been net sellers of U.S. stocks for the year to date, with around $52 billion exiting U.S. equity ETFs and mutual funds. By contrast, inflows have been observed into money-market funds (+$425 billion), bonds (+$136 billion), and foreign equity funds (+$40 billion) during the same period. These patterns reflect a broader repositioning in risk tolerance, in which traditional equity exposure is trimmed in favor of instruments that can offer defensible yields with lower downside risk.
The broader historical context for these shifts is instructive. In the wake of the financial crisis, extraordinarily low interest rates encouraged many investors—across households and professional portfolios—to pursue higher-yielding, higher-risk assets such as stocks. The result was a long-running tilt toward equities that, while historically rewarding over long horizons, also exposed investors to substantial drawdowns during market stress periods. Over the long run, household net equity demand has been negative, with equities tending to appreciate while households withdraw more capital than they invest. This contrasts with the earlier era, when household behavior was more balanced or even tilted toward equity accumulation relative to other asset classes.
Looking across a broader horizon, Goldman Sachs researchers highlight a notable shift in the intertemporal pattern of flows. In the period from 1980 through the late 2000s, households often operated with different risk appetites and funding constraints than in the post-crisis era, but the last decade or so has been exceptional in its own right. As the environment transitions away from the ultra-low-rate regime, households may be recalibrating their allocations to reflect both price levels and the expected path of policy rates, inflation, and the risk-return trade-offs embedded in different asset classes.
Given these dynamics, the observed inflows into money-market and bond funds can be interpreted as a signal of a broader rotation away from equities and toward alternative investment vehicles that deliver yield with relatively lower risk. The momentum behind these flows is likely to be sustained as long as the yield advantage of fixed income and cash-like instruments remains compelling relative to the return profiles offered by equities, and as concerns about systemic risk in the banking sector partly recede or remain manageable.
The implications for investors and for markets are nuanced. On one hand, persistent inflows into conservative, yield-bearing assets may temper equity market strength in the near term by reducing the buy-side demand for stocks. On the other hand, a continued reallocation toward credit and cash-rich strategies can help stabilize portfolios during periods of volatility, providing ballast and diversification while offering a credible alternative to equity exposure. The balance between these forces will hinge on how interest rates evolve, how credit spreads behave, and how risk sentiment is influenced by evolving macroeconomic conditions and financial stability signals.
The TINA Era Ends: From There Is No Alternative to There Are Reasonable Alternatives
A central theme emerging from Goldman Sachs Research is the shifting perception of investment alternatives in a changing rate environment. The traditional adage “there is no alternative” (TINA) to stocks has given way to a more nuanced recognizing that “there are reasonable alternatives” (TARA). In their team note, Goldman Sachs strategists Cormac Conners and David Kostin explain that the current yield landscape makes other asset classes—especially fixed income and cash-like vehicles—more attractive relative to equities than in the recent past.
The implication is not a wholesale abandonment of stocks but a recalibration of portfolio construction where equities are weighed against credible alternatives that can offer competitive risk-adjusted returns. This shift reflects the reality that higher yields now exist in safer assets, which changes the risk-reward calculus for households and other market participants. With two-year Treasuries yielding roughly 4%, a substantial premium over the crisis-era low-rate regime is evident. The opportunity set has broadened, and investors are factoring in diversification benefits, liquidity considerations, and expectations for rate movements in assessing where to allocate capital.
From a strategic standpoint, this reweighting toward alternative assets does not necessarily imply a permanent downdraft for equities. Rather, it indicates a more nuanced, balanced approach to asset allocation that incorporates the advantages of fixed income, money markets, and, where appropriate, selective equity exposure. The evolving narrative around TINA-to-TARA suggests that investors perceive viable options beyond equities that can meet income and capital-preservation objectives, particularly in environments where rates are elevated and where the risk of credit dislocations remains a concern.
This shift is also tied to behavioral patterns that influence household decisions. When savings rates rise or when access to relatively attractive yield opportunities improves in fixed income markets, households may accelerate the reallocation away from stocks. Conversely, if yield curves flatten or if risk premia widen in fixed income, the relative attractiveness of equities could reassert itself, potentially sparking a renewed appetite for stock exposure. The ongoing tension between risk aversion and return-seeking behavior will help determine how pronounced and persistent the TARA phenomenon proves to be over the coming quarters.
Two-Year Treasuries and Yield Dynamics: What the Market Is Signaling
The yield environment has become a focal point for households and investors as they reassess their asset allocations. U.S. Treasuries with maturities of two years are currently yielding around 4%, a marked increase from the 2.4% level observed a year ago. This rise in yields is a key driver of the shifts in investor flows into fixed income and money-market funds. The higher yield offers a more compelling income stream for risk-averse investors, potentially improving the attractiveness of short-duration government securities relative to equities in many scenarios.
The dynamics at play involve a combination of central-bank policy expectations, inflation trajectory, and market expectations for future rate adjustments. When yields rise, prices typically fall, and the marginal buyer’s appetite for duration-linked risk becomes sensitive to perceived credit risk, liquidity, and the potential for rate hikes. In this context, households and other market participants may prefer to lock in higher yields for a defined horizon, while maintaining liquidity in the event of a price correction in equities or in the broader risk-on environment.
Moreover, the yield increase in short-duration Treasuries interacts with the broader yield curve and credit markets. As the two-year benchmark moves higher, the relative attractiveness of longer-dated Treasuries and corporate bonds changes, potentially influencing where capital is deployed within fixed-income markets. The interaction between rate expectations, inflation data, and bank-sector health remains a critical driver of flows into fixed-income funds and cash-equivalent vehicles. In sum, the yield dynamics are both a signal and a constraint: they invite households to consider fixed income and money markets more seriously, while simultaneously raising questions about the optimal balance of risk, duration, and return across a diversified portfolio.
Historical Flows and Household Behavior: A Long-Run Perspective
The observed current flows into money-market and bond funds fit within a broader historical framework of household asset allocation. Over the longer horizon, households have shown a tendency to shift toward fixed-income and yield-bearing assets when perceived risks in the stock markets rise or when the opportunity set in cash-like instruments improves. This tendency reflects a balance between capital preservation and income generation, especially for households that prioritize more predictable cash flows.
Year-to-date data indicate that households have been net sellers of U.S. stocks, with a net outflow from U.S. equity ETFs and mutual funds totaling around $52 billion. In contrast, inflows have been recorded into money-market funds, bonds, and foreign equity funds to varying degrees, signaling a broader preference for diversification and risk management in response to evolving market conditions. Specifically, money-market fund assets have attracted approximately $425 billion in inflows, while bond funds have drawn in about $136 billion, and foreign equity funds roughly $40 billion, during the same timeframe.
This pattern underscores a fundamental shift in household risk tolerance and investment objectives. Across the period from the early 1980s onward, households have tended to sell equities more often than they buy them, a net-outflow tendency that, in the long run, has left equities to appreciate while households withdraw more capital than they contribute. The combination of higher yields in fixed income, evolving retirement funding needs, and a more cautious stance toward risk has contributed to a structural shift in the composition of household portfolios.
From a macro perspective, these tendencies also reflect the interplay between policy rates, saving behaviors, and behavioral finance considerations. The low-rate environment that followed the most severe financial crisis prolonged a bias toward equity accumulation for many investors, aided by the total return potential of stocks over extended horizons. Yet as policy rates normalize and yield opportunities in fixed income widen, households may recalibrate their asset mix to emphasize capital preservation and incremental income without forgoing exposure to growth through selective stock allocations. The net effect is a multi-asset shift that retains equities as a component of diversified portfolios but places a greater emphasis on fixed income and cash-like assets to buffer volatility and deliver more stable income streams.
The 1980–2021 Contrast: Long-Run Equity Demand vs. Tactical Shifts
A longer-run comparison of household behavior reveals a steep contrast between periods characterized by low rates and periods with higher, more conventional yields. In the 1980s and early 1990s, households tended to sell equities less aggressively than in later decades, even as volatility persisted. Since 1980, the long-run pattern has often seen households net selling equities or reducing net purchases relative to overall financial assets, given that equities typically appreciate over time and households may withdraw more capital than they invest.
During 2010–2021, however, the environment was unusual in terms of equity demand. Households were net buyers of equities to the tune of about 0.2% of their financial assets on average per year. This stable, albeit modest, demand for equity exposure reflected a combination of strong market returns, improving risk tolerance, and a favorable saving pattern for many households. In contrast, the broader historical baseline—spanning earlier decades—tends to show households selling equities more often relative to their asset base, highlighting a structural difference in the drivers of demand across time.
The current shift away from equity funds aligns with the logic that higher yields on fixed-income instruments, plus rising concerns about potential bank-sector stress, increase the appeal of diversification and capital-preservation strategies. While equities historically offered capital appreciation and longer-term growth potential, the present environment emphasizes income generation, liquidity, and risk management. The ongoing reallocation into credit and money-market assets can be interpreted as households seeking to strike an optimal balance between yield, safety, and the ability to reposition quickly if market conditions deteriorate further.
This historical lens also helps illuminate the possible trajectory for flows in the near to medium term. If the yield on short-term Treasuries remains compelling and savings rates shift downward, households may continue to rotate away from equities with a more persistent, multi-quarter horizon. Conversely, a normalization in rate expectations, improvement in bank-sector stability, and returns in equity markets that reassure risk appetite could slow or even reverse portions of the current rotation, especially if fixed-income valuations become stretched or if credit conditions tighten unexpectedly. The dynamic interplay between policy, macro risk, and investor psychology will continue to shape the pace and magnitude of flows across stocks, bonds, and cash-like assets.
Goldman Sachs Forecasts: The Base Case and Market Implications
Based on Goldman Sachs economists’ forecasts and the team’s assessment of current sentiment, the strategists project a notable rotation from stocks into fixed income and money-market instruments. In their base case scenario, households are expected to sell about $750 billion of stocks this year as they rotate into bond and money-market funds. This projected outflow from equities would represent a substantial shift in asset allocation, reflecting both the improved yield opportunities in fixed income and a perceived reduction in the attractiveness of riskier assets amid market volatility and a slower pace of earnings growth in equities.
Importantly, Goldman’s forecast posits that these stock outflows would be offset by more than $1 trillion flowing into equity funds from foreign investors, corporate sponsors, and pension funds. This expectation of significant inflows from abroad and institutional buyers into equity funds could counterbalance some of the domestic selling pressure, providing an external source of demand to support equity markets even as households pare back their direct stock exposure. The net effect, in this scenario, would reflect a more diverse, globally sourced demand profile for equities, reducing the risk of a domestic equity drawdown purely from household selling.
As households shift away from stocks, Goldman Sachs Research anticipates they will redirect their capital toward credit and money-market assets—consistent with a broader historical pattern in which investors seek safety and liquidity when confidence in equity markets ebbs or when yields in safer assets become materially more attractive. The firm notes that this rotation toward higher-yielding fixed-income and cash-like instruments has been a recurring feature in the past when longer-term yields are elevated and savings rates decline.
Data-backed context supports this forecast. Since mid-2022, roughly $87 billion has flowed out of U.S. equity mutual funds and ETFs, reflecting a persistent trend of disinvestment from domestic equities. Meanwhile, the significant inflows into bond and money-market funds observed in the most recent period signal that the household rotation away from equities and toward alternatives is well underway and likely to persist as long as yields remain compelling and risk concerns stay elevated.
The implications of Goldman Sachs’ base-case scenario are multi-faceted. For equity markets, large-scale domestic selling by households could exert downward pressure on stock prices, particularly if offsetting inflows from foreign and institutional buyers prove insufficient to compensate for the outflow. For fixed-income markets, sustained demand from households for credit and cash-like assets could support debt markets, potentially narrowing credit spreads and stabilizing liquidity. For the broader financial system, a balanced flow dynamic—domestic exits from equities accompanied by external inflows into equity funds and robust demand for fixed income—could help diversify the risk profile of household portfolios while maintaining overall market depth.
Inflows Offsetting Outflows: The Role of Foreign and Institutional Buyers
A critical piece of Goldman Sachs’ analysis is the expectation that inflows into equity funds from foreign investors, corporations, and pension funds will more than offset the anticipated domestic equity outflows by households. In their base-case framework, foreign and institutional participants are projected to contribute more than $1 trillion to equity funds, providing a substantial counterbalance to the household retreat from U.S. stocks. This dynamic underscores the global nature of equity market demand and highlights the importance of cross-border capital flows in shaping the trajectory of domestic equities during a period of shifting domestic sentiment.
The presence of sizable foreign and institutional inflows into equity funds can help stabilize stock prices and sustain market liquidity even as domestic household participation drifts lower. Such inflows are often motivated by a combination of expectations for global growth, diversification needs within large pension and endowment portfolios, and the strategic asset allocation decisions of multinational corporations. When these entities allocate capital to U.S. equity funds, they contribute to the availability of capital for companies and support ongoing market functionality, potentially moderating any negative impact from domestic household outflows.
Moreover, the observed outflows from U.S. equity mutual funds and ETFs since mid-2022—amounting to around $87 billion—reflect a durable pattern of rotation within the U.S. market rather than a one-off fund shift. This sustained movement toward fixed income and money-market instruments suggests that households are retooling their portfolios in response to a higher-rate world and the perceived safety and yield advantages offered by non-equity assets. As these flows evolve, the relative balance of domestic and foreign demand will remain a key determinant of overall market performance, risk appetite, and the pace at which households re-enter equities on the back of improving financial conditions.
The Road Ahead: Credit and Money Market Assets as the Next Frontier
Goldman Sachs Research’s forward-facing view indicates that as households reduce their equity exposure, the next logical destination for much of their capital is credit and money-market assets. This trajectory is consistent with observed patterns in the last several years, where households and other investors have shown a preference for credit markets and highly liquid instruments when the macro environment becomes uncertain and rate expectations are elevated.
Several factors support this anticipated rotation. First, higher 10-year Treasury yields, relative to the recent past, tend to be associated with reduced net demand for stocks as the opportunity cost of holding volatile equities rises. Second, lower savings rates—whether driven by macroeconomic factors or household balance-sheet dynamics—can shift the focus toward assets that deliver consistent, predictable income. Third, the ongoing need for liquidity and capital preservation—especially for risk-averse investors or those with upcoming financial obligations—bolsters demand for money-market instruments and short-duration credit.
In this context, investors may increasingly seek the balance of risk and return offered by credit products, including corporate bonds and other fixed-income instruments that provide yield without exposing capital to the full equity cycle. Money-market funds play a crucial role as a liquidity anchor within diversified portfolios, enabling investors to adjust exposure quickly in response to shifting market conditions. While the rotation toward credit and money-market assets reduces exposure to equity risk in the near term, it also requires careful attention to credit quality, interest-rate risk, and liquidity dynamics to ensure that the portfolio remains aligned with longer-term objectives.
The data supporting these expectations point to a broad-based rotation out of equities. In particular, the inflows into bond and money-market funds relative to outflows from stock funds signify a migration toward more defensive strategies. This transition is not merely episodic but appears to be part of a longer-term rebalancing process that could persist as the macroeconomy evolves and as investors reassess the trade-offs between income, safety, and growth potential. As household behavior continues to adjust to a higher-rate environment, the pathways through which capital moves—into credit, into money-market assets, and into selective equity exposure—will continue to shape market outcomes and investment strategy for the foreseeable future.
Data, Methodology, and Cautions: Educational Context for Investors
This article is provided for educational purposes. The information herein does not constitute a recommendation from any Goldman Sachs entity to any recipient, and Goldman Sachs is not delivering financial, economic, legal, investment, accounting, or tax advice through this article or to its readers. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article, and any liability arising from the information presented here is expressly disclaimed.
The analysis draws on flows data and research from Goldman Sachs Research, alongside data from market-tracking services that monitor fund flows and asset movement. The figures cited reflect recent reporting and are subject to revision as new data become available. While every effort is made to ensure accuracy, the interpretation of fund-flow data requires careful consideration of timing, methodology, and the specific definitions used by data sources. The overarching takeaway is the directional shift in flows and the implied risk-reward recalibration among households and other market participants, rather than a precise forecast of market movements or investment outcomes.
Conclusion
The recent surge in money flowing into bond funds and money-market funds, combined with rising yields on short-dated U.S. Treasuries, points to a material reallocation of household and broader market capital away from equities and toward yield-bearing, safer assets. This shift is reinforced by the perception that there are now viable alternatives to stocks in the form of fixed-income and cash-like investments, reflecting a move away from the old TINA regime toward a more nuanced TARA framework. The two-year Treasury yield hovering near 4% serves as a powerful anchor for this rebalancing, reinforcing the appeal of safer assets during times of banking-sector jitters and macro uncertainty.
Goldman Sachs Research highlights a base-case scenario in which households sell about $750 billion of stocks this year, with those outflows offset by more than $1 trillion flowing into equity funds from foreign investors, companies, and pension funds. This dynamic suggests a market environment where domestic flows are complemented by substantial cross-border demand, potentially moderating the immediate impact of domestic household selling on stock prices. In parallel, the ongoing rotation into credit and money-market assets aligns with historical patterns in which investors seek liquidity and stable income in a higher-rate world.
As the investment landscape evolves, readers should monitor ongoing data on fund flows, bank-sector health, and rate expectations, as these factors will continue to shape decision-making for households, institutions, and policymakers alike. The balance of domestic and foreign demand, the persistence of yield advantages in fixed income, and the evolution of risk sentiment will be the key determinants of how quickly and how deeply households adjust their portfolios in the months ahead.
