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Investors are losing faith in momentum and pouring billions of dollars into low-volatility stock funds, another sign of increasingly defensive posturing as market confidence deteriorates.

The iShares Edge MSCI USA Momentum exchange-traded fund MTUM, -0.45%[1]  , a good proxy for the equity momentum trade overall, saw inflows for the first eight months of the year, until a violent reversal over the past month, according to an analysis from Ned Davis Research. In fact, investors pulled so much money out of MTUM — $1.2 billion — in the past month alone that it’s now down $235 million in the year to date.

As a reminder, the momentum trade in the stock market is one that does well in the waning stages of an expansion, when investors aren’t as keen on finding lower-priced value stocks that may turn out profitable later on. “Momentum” implies buying more of the same that others have already bid up[2].

Related: It’s reflation that’s turning the ‘Great Rotation,’ these analysts say[3]

At the end of the summer, it looked briefly like the momentum trade was being replaced by a rotation to value stocks, as central bank stimulus seemed to buy more time for investors. But now there’s an extra note of caution in the way exchange-traded fund investors are positioning themselves, noted Ned Davis’ Will Geisdorf.

The iShares Edge MSCI Min Vol USA fund ...

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