The Tina mindset – There Is No Alternative to stocks in a low-rate world – has been shaken.

In a note last week, Barclays cautioned that equity allocations remain at near-record levels among mutual funds and retail investors. Despite bearish sentiment, equity flows have held up in 2022, with the lack of alternatives (Tina) keeping investors "pretty much fully invested" in stocks.

However, equity flows have now turned negative. Global equity fund outflows recently hit $17.5 billion (€16.4 billion), the biggest weekly outflow since December. Importantly, the four-week rolling equity flows from funds turned negative for the first time since September 2020.

Rapidly-rising rates mean bonds are now an alternative to stocks. That said, Barclays notes bonds remain vulnerable themselves as central banks withdraw liquidity. Additionally, strong earnings provide support for stocks.

Still, it’s an obvious vulnerability that equity allocations of both fund and retail investors are near the top of their historical range. If those investors “follow the classic recession playbook and act on their very bearish sentiment”, cautions Barclays, the equity sell-off “could be material”.