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An exodus from the junk bond market in the United States should be a warning to anyone holding shares in the UK.

The latest data from America show investors are dumping riskier debt faster than during the financial crisis in 2008. The money is rushing to safe havens such as US government bonds and gold. The staggering shift in investment strategy marks a reversal of the chase for returns that has been in place for five years.

High-yield bond funds and exchange- traded funds reported a record $8.2bn (£4.8bn) weekly outflow last week, according to the latest data from EPFR Global. The wall of money coming out of riskier assets exceeds the previous record single-week outflow (set during the June 2013 bond market sell-off) by about $2.5bn. The withdrawals are also larger than those recorded at the height of the global financial crisis.

The retreats from high-yield bond funds have been accelerating and the latest data show the fifth straight week of billion-dollar outflows, with an average outflow of $3.15bn during the past month. Lipper, the fund-management analysis company, shows about 20pc of withdrawals came out of exchange-traded funds, with the remaining 80pc coming from mutual funds.

The flight from riskier assets has been prompted by a sharp increase in geopolitical risk and the US winding down the quantitative easing that involved buying bonds. The US and Europe are now locked into a sanctions war with Russia following the downing of Malaysia Airlines flight MH17 over Ukraine, while at the same time the US is expected to exit its $85bn-a-month bond-buying scheme that has been in place since the end of 2012.

High-yield bonds are known as junk bonds because they offer higher returns, but there is also a greater risk the company that issued the bond will default, or stop making interest payments. The classification of a junk bond is one with a rating below BBB from Standard & Poor’s, or below Baa3 from Moody’s. Those ratings are in stark contrast to UK government debt, which is rated AAA, or Coca-Cola in the US, which is rated AA-.

In the past, the junk bond market has only really been used by professional investors or those with a higher risk appetite. However, all that changed from 2009 onwards, when central banks destroyed investors’ returns by reducing borrowing rates to almost zero and flooding the global economy with money.

A bubble forms when prices exceed the level that the underlying fundamentals can support. Investors desperate for returns have been blowing a bubble in the high-yield bond markets for five years.

Investors have placed about $80bn into US high-yield bond funds during the past half-decade. Assets under management in European high-yield bond funds have grown from €12bn at the beginning of 2009 to €57bn (£45.5bn) in April 2014, according to Morningstar data.

The extra money has led to prices being driven to extraordinary levels. When the price of a bond rises, the yield falls. The average yields on junk bonds reached a record low of 4.77pc in late June, compared with the height of the financial crisis, when yields spiked to 22.9pc in 2008.

Companies have rushed to take advantage of this dash to trash by issuing record levels of debt, safe in the knowledge that the market would buy almost anything.

The US high-yield bond market issued a record $29.3bn in new debt from 60 different companies in June, more than double the same period a year earlier. When you add in figures from April and May, the quarter as a whole hit a record $105bn of issuance, according to data from S&P Capital IQ Leveraged Commentary and Data.

The bursting of the bubble in the high-yield debt market has significant implications for British investors.

The first is that it hints at a repricing of risk within the financial markets, something that has been notable by its absence for five years. When financial markets price risk incorrectly in the bond markets, they will also price risk incorrectly in the equity market. If the exodus from the bond markets is indeed an indication of mispricing returning to the bond markets, equity markets will follow shortly.

The other issue is that many of the companies that have been able to refinance their debts in the current environment would not be able to do so under normal or stressed conditions as money leaves the high-yield bond market. That means that when these companies have to refinance, they will either have to pay a lot more for their debts or they will default.

As prices of high-yield bonds fall, the yields will conversely rise, making the cost of debt more expensive. Total corporate debt levels are now 35pc above those reached in 2008, according to Société Générale. If the interest costs on the debt rise it will eat into profitability, and share prices will have to adjust accordingly.

The final problem could also come from a “Black Swan” event such as the collapse of a bond fund due to liquidity problems. When a bond fund is hit by large redemption requests from investors, it sells its most liquid assets first to raise cash. That leaves the fund with bonds that are hard to sell in a market with few buyers, falling prices and investors wanting their money back.

The number of buyers in the high- yield bond market has also dried up as most banks have greatly reduced or even shut down their fixed-income dealing operations during the past five years. This has created a terrible lack of liquidity in bond markets, making prices extremely volatile.

The credit market usually leads the equity market during turning points, as happened when credit markets cracked first in 2008.

The flood of money coming out of the US high-yield bond market is only a tremor at the moment, but the financial markets have been so distorted by government meddling and unable to price risk correctly that it could have far- reaching consequences.

UK equity investors should remain calm, as ultimately a repricing of risk is healthy and long overdue. Investors should ensure their holdings are well diversified across industries and asset classes.

Now might be a good time to review the portfolio and perhaps raise cash by taking some profits.