Or do they?
Watching where the money is flowing is always important. Some money flows are automatic - if you sell a stock and don't immediately reinvest the proceeds, your money flows into a money market account, or a bunch of high quality short term debt investments, or a FDIC insured savings account - where you are fairly certain nothing bad will happen to it. Some people shift their money from one asset to another on purpose - if they are scared out of stocks, they may turn to gold, or other hard assets. If they are scared out of gold, they turn to US Treasuries (sometimes ironically).
Where is the money flowing now? Are people rushing out of the stock market and parking money in Gold, Treasuries and canned beans?
Not exactly. Some notable inflows have been to the junk bond and bank loan funds. These are very economically sensitive debt instruments, so if one was worried about the long term health of the economy, they would dump these just as fast (if not faster than) equities. It is easier to hang onto a high quality stock than a low quality bond or leveraged loan when things get tough.
The well known junk bond fund ETF has seen an interesting play lately. It appears that an institutional investor has spent the past few weeks acquiring about $800 Million of the fund, only to redeem it for the underlying bonds. Getting the bonds will allow them to have a more selective view, and they are no doubt dropping some from their portfolio, but it is also a more long term view. You don't hold large amounts of individual bonds for the liquidity - they would be very hard to get rid of if things got tight.
A newer fund, BKLN (Bank Loan, not Brooklyn) holds bank loans of highly leveraged companies. It saw $100 Million worth of shares created last week. This is not a massive vote of confidence based on the size of the market, but it is huge considering that was fully 25% of the fund at the time. This is a newer fund, and it is tracking a very illiquid sector. Again, this would be tough to dump if things went south.
People buy Gold and canned beans when they are scared. People by Treasuries when they don't have any ideas. People buy junk bonds and bank loans when they think that everyone else is more nervous than they should be. These two etfs are down only a blip compared to the money flowing out of equities.
