Between earn-nothing cash, broken long-term bonds, these are the safety trades of 2026 market
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- Ultra-short bond ETFs attracted $12.8 billion in inflows in July, according to Morningstar Direct, offering yields 75 to 110 basis points above money market ETFs with comparable duration and interest rate sensitivity, per Brookwood CIO Christopher Coolidge.
- The iShares 20+ Year Treasury Bond ETF (TLT) has averaged a negative 6.7% annual return over the past five years, while the iShares 7-10 Year Treasury Bond ETF (IEF) has averaged a 1% annual decline — making long-duration Treasuries unreliable portfolio diversifiers.
- Brookwood Investment Group raised its model portfolio cash allocation from about 2% in June to roughly 5%, building a basket of ultra-short ETFs that combines treasuries, floating-rate securities, active credit management, and option-enhanced income strategies.
- Money market ETFs — which first began trading in 2024 — held $24 billion across nine funds at the end of July, a fraction of the $7.7 trillion in money market mutual funds, but pulled $18.7 billion in net inflows January through July versus $2.8 billion for mutual fund peers.
- The ProShares GENIUS Money Market ETF (IQMM) is the largest money market ETF with $17.4 billion in assets at the end of July, according to Morningstar Direct.
- Morningstar-cited allocation data shows the shift is incremental rather than wholesale: 64% of fund assets sit in stocks, 18% in bond funds, and 17.5% in money markets as of end of June, with the money-market share holding in an 18%–20% range for years.
- Cyrus Amini, CIO at Hyphen Wealth Management, said clients are locking in equity gains into short-duration fixed income and money markets rather than waiting for a drawdown, calling it preferable to "be more prudent ahead of time."
Why it matters: This matters because the traditional 60/40 hedge is failing — long-duration Treasuries have posted a negative 6.7% annualized return over five years and bank deposits yield under 1%. With $12.8 billion flowing into ultra-short bond ETFs in July alone and money market ETFs pulling $18.7 billion YTD, short-duration fixed income has replaced both long bonds and cash as the de facto 2026 safety trade.
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