The U.S. equity market has enjoyed a great run, with peaking volume in buybacks, two consecutive quarters of 24% earnings growth and the fastest economic expansion in four years strengthening investor confidence in the ongoing bull rally.

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The bullish sentiment has jumped to levels that foreshadow the year’s potentially worst pullback yet, causing Citigroup to warn that the markets could correct. Goldman Sachs’ bull/bear market indicator has also risen to elevated levels due to the high valuations and tight labor market, which may usher in rising inflation.

“Flows tend to follow market moves as opposed to lead market moves,” Nolte added. “If something is doing well, then everybody looks at it and says, ‘Oh, we’ve got to have some of that,’ and piles into it.”

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