Outcome: sparkling fears that the rally in stocks is overdone. But, in reality, those in-flows may not signify much at all. The most money in nine years went into stock market mutual funds last month: U.S. equity utual funds took in a net $19.6 billion in the four weeks ended ended Jan. 30, according to the Investment Company Institute. Since retail investors have a reputation for buying big at just teh wrong time, that got some market-watchers anxious.
But an analysis by Credit Suisse strategist Ana Auramovic finds that, since 2009, fund flows in any given week had only a very slight correlation with stock returns in either the previous or the current week. There is next to no relationship with returns in the week after. This all makes sense when you consider that about $2.5 trillion in stocks changed hnds in the U.S. last month. The $20 billion or so in fund flows is just a drop in the bucket.