The smart money has moved away from stocks. So is the era of stock investing over?
It's too early to tell, but one thing is certain: "Money goes where it is treated best, and that hasn't been in stocks," says Wade Slome, who advises high-net-worth investors and runs a hedge fund at his firm, Sidoxia Capital Management in Newport Beach, Calif.
The overall stock market is down over the past decade, while the price of gold has more than quadrupled and corporate bond returns have doubled. Couple that with the slow economy, and hedge fund managers and institutional investors continue to shift money away from stocks to investments they think will be safer.
An estimated $170 billion has been put in bond funds this year, while $35 billion has been pulled from stock funds, according to the Investment Company Institute, a trade group for the mutual fund industry.
So much for buy and hold.
Analysts at Bespoke Investment Group say we're in a "drive-by market." Their take: Stock investors aren't anticipating or analyzing anything. They just react to the news of the day and then move on to the next thing.
Three months ago, the survival of European banks and economies was front and center. Now it's barely mentioned. Same goes for the "flash crash" in May. News of strong corporate earnings one day can drive the market sharply higher, but a weak earnings report the next can send prices plunging.
"Investors look at what is in front of them at that minute, and that's it," says Paul Hickey, one of the founders of the investment research firm.
The volatility begets more volatility, which further unnerves investors who have been punished by losses over the past decade. The total return, including dividend, for the benchmark Standard & Poor's 500 index is down about 11 percent since August 2000, according to Bespoke.
That means an investor who put in $10,000 in an S&P index fund 10 years ago and held it now has less than $9,000 to show for it.
Billionaire investor George Soros bolted out of stocks in the second quarter. Other big-name investors with large positions in gold ETFs include John Paulson, made famous for his successful bet that the subprime mortgage market would blow up. They're sticking with gold, even though prices for the precious metal are up 9 percent this year to more than $1,200 an ounce. That's four times the $300 price of an ounce of gold in 2000.
There has been an equally bullish move into government and corporate bonds. The Federal Reserve has pushed down interest rates to almost zero to stimulate the economy, spurring a rally in Treasury bonds and notes. The benchmark 10-year Treasury yield is down to 2.6 percent, its lowest level since the height of the financial crisis in 2009. (Prices and yields move in the opposite direction.)
Of course, investing in bonds and gold aren't risk-free. Far from it. The dramatic rallies in both have some on Wall Street saying that bonds and gold could be nearing a bubble that's about to pop.
By taking those positions, investors are hedging their bets about what's to come with the economy. Gold is considered a protector against inflation, and bonds are good to hold in times of deflation.
As for stocks, they're getting the short shrift they deserve.