“The bottom line here is pretty straightforward: January is proving to be a barnburner month for demand in ETFs which focus on equity investments. Not only are money flows well ahead of last year, but they are skewed dramatically towards riskier assets,” he wrote.
The ETF money flows of January 2013 “are a clear manifestation of more traditional risk-seeking, risk-embracing, risk loving capital,” the strategist added. “Equity bulls will want to see this trend continue. Bears will no doubt think it is a sign that the top is near.”
Recent ETF and mutual fund flows indicate that some investors are returning to equities after abandoning stocks in the wake of the 2008 financial crisis.
“Since the March 2009 lows, mutual fund investors have withdrawn $365 billion in capital from their U.S. listed funds which specialize in domestic stocks. During the banner returns of 2012, those same investors pulled $151 billion,” Colas points out. “Where did it go? Fixed income funds got it all, and more — $256 billion in total. ETFs which focus on domestic equities have seen $58 billion of inflows in the past year, but that is only a third of the $174 billion in total flows for all ETF products.” [‘Great Rotation’ from Bonds to Stocks?]