For the most part, the action in US equities has been based on rotation into safer sectors and income stocks

For the most part, the action in US equities has been based on rotation into safer sectors and income stocks. At least, that's what we've been hearing about. Lost somewhat in the mix, is that the 10-year Treasury yield dropped below a key level to 2.5%. Since February, the yield has essentially not been able to break below 2.6%, despite several attempts. The recent drop suggests bond demand may not have peaked after all. Moreover, investors aren't just snatching up bonds. Preferred stock ETFs are seeing a significant increase in cash inflows. The largest preferred stock fund, PFF, has pulled in over $270 million in new capital so far in May. It seems pretty clear, investors are taking a more conservative stance on portfolio allocation these days. And, it's highly possible US stocks are going to continue heading sideways this summer.