Investors Are Hiding Despite the Best Earnings in 10 Years

• Q1 earnings grew 28% overall and 14% excluding big tech, yet only $1 of every $16 in ETF and mutual fund flows goes to equities while $15 goes to bonds and money markets
• Only 8% of ultra-high-net-worth clients believe their advisors deliver the risk management they want, despite 80% saying they desire it
• Buffer ETFs offer downside protection ranging from 9% to 20% or more, providing quantifiable risk levels that traditional 60/40 portfolios cannot match; one RIA doubled AUM from $200M to $400M using buffer strategies with a wealth preservation message

Summary: Investors Favor Bonds Despite Strong Q1 Earnings Growth

Despite first-quarter earnings growing 28%—the strongest performance in a decade—investors remain risk-averse, with $15 out of every $16 in new investment flows directed toward bonds and money markets rather than equities. The data was presented at a Goldman Sachs Asset Management media event on May 27.

Key Figures and Facts

• Q1 2024 earnings: 28% growth overall; 14% excluding big tech (highest in 10 years)
• Approximately 90% of companies have reported earnings
• Only $1 of every $16 in ETF/mutual fund flows reaches equities
• 8% of ultra-high-net-worth clients believe their advisors deliver adequate risk management, despite 80% requesting it

Main Solution: Buffer ETFs

Buffer ETFs are gaining traction as a solution for bringing cautious investors back into equity markets. These products offer downside protection ranging from 9% to 20%+, allowing advisors to customize risk exposure per client. Graham Day of Innovator ETFs highlighted one California RIA that doubled assets under management (from $200M to $400M) by incorporating buffer strategies with a wealth preservation approach.

Market Context

Panelists identified a disconnect between strong corporate fundamentals and investor sentiment. Concerns include inflation, oil prices, and shifting Fed rate expectations—initially projecting four cuts in 2026, now anticipating none. Traditional 60/40 portfolios failed to provide expected cushioning during 2022 when stocks and bonds declined simultaneously.

Goldman Sachs' Osman Ali noted the firm has employed AI in data analysis for over 15 years, emphasizing that effective AI application requires properly cleaned and structured data. The panel concluded that portfolio construction tools have evolved significantly, moving beyond traditional stock-bond-cash allocations.