Under the current economic climate, ETFs are all the rage, much thanks to their great flexibility and minimal fees.
Move over fund flows, ETF flows are far more interesting right now. As Jonathan Golub, chief U.S. market strategist at RBC Dominion Securities, pointed out, while traditional fund flows provide a window into the trends among longer-term investors, flows among exchange-traded funds reveal the inner workings of professional traders.
So what are ETF flows telling us? According to Mr. Golub, flows have been sharp and consistent since mid-August, with the majority of money flowing into broad indexes, as opposed to ETFs geared toward certain styles and sectors.
"We view this as a sign of confidence in the markets among professional investors and traders," he said in a note.
The question is how long this confidence will last. ETFs are easy to trade on stock exchanges throughout the day, which explains the draw among the professional set: They can move in and out of positions quickly.
Wall Street strategist have been lukewarm about the stock market in 2014, according the forecasts issued so far. That is, they see ongoing gains ahead, with most strategists rejecting the idea that we're headed into a dangerous stock market bubble.
But at the same time, strategists are cautious: With no serious correction in the S&P 500 in more than two years, many observers believe we are overdue for some volatility. ETF inflows might be looking good right now, but they don't say much about commitment levels in the longer term.
David Berman