Investors who bought stocks in early 2010 are in the red and many may

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be tempted to switch into cash — despite the risk that some central banks will renew efforts to make money more plentiful and, therefore, cheaper.

Looking beyond Friday’s evidence of startlingly strong German economic growth in the second quarter, many think the global economic recovery is already losing momentum.

The US labour and housing markets remain sluggish, while slowing growth in China’s investment and factory output and weaker retail sales portray softening domestic demand there.

Over the past week the Federal Reserve has decided to buy more government debt with the cash from maturing mortgage bonds it holds, possibly heralding the start of more aggressive monetary easing. The Bank of England also left the door open for more easing after it cut its forecast for UK economic growth.

Monetary easing in theory should encourage investors to buy risky and higher-yielding assets as the return on cash diminishes. But with a threat of a return to recession, cash preservation might be more of a priority for some investors.

Backing up this point, fund tracker EPFR’s data shows investors poured another $5.1 billion in the latest week into money market funds, which posted their first three week run of inflows since the first quarter of 2009.

“Quantitative easing is likely to bring diminishing and ultimately negative returns,” noted Max King, multi-asset portfolio manager at Investec Asset Management.

Separate data from the industry’s Money Fund Report shows US money market fund assets rose by $10.3 billion to $2.8 trillion in the latest week. Various speeches from Fed officials and the minutes of the Bank of England’s August monetary policy meeting, due in the coming week, should give more clues about the possibility of further easing on both sides of the Atlantic.

The renewed rush to money market funds — unloved asset classes during the risk rally in 2009 — reflects disappointment over stock market returns.

World stocks, measured by MSCI are down more than 4 per cent this year, having risen 31 per cent in 2009. Even emerging market stocks are slightly down from the beginning of this year.