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January is starting to look like the comeback month for stocks.

This isn't because major indexes have been off to an impressive start so far this year – although they have – but rather because investors have been taking a shining to stocks through their renewed interest in equity mutual funds.

For the week ended Jan. 16, U.S. investors moved a net $3.8-billion (U.S.) moved into equity mutual funds. That followed the $7.5-billion inflows in the previous week (along with another $10.8-billion directed to exchange-traded funds).

Add it up, and you're looking at the biggest two-week inflow into stocks since April, 2000, according to Lipper – and a potential end to 22 consecutive months of outflows.

In other words, even though the S&P 500 has risen some 120 per cent from its low in 2009, small investors have remained wary of stocks throughout the second half of this recovery, perhaps put off by the fear that the rebound is merely setting up the next violent downturn.

Now, with money flowing back into stocks over the past two weeks, observers are trying to figure out what it means, if anything.

The bullish view is that it suggests that once-sidelined investors are warming up to equities. As their money moves into stocks, at the expense of money market funds and bond funds, the stock market should get a boost – perhaps driving the S&P 500 to a new record high.

But the shift has also attracted the attention of contrarian-minded people, who can't help but point out that latecomers to a bull market – especially one that is already close to four years old – too often mark its end.

John Kozey, a senior analyst at Thomson Reuters, leans toward the contrarian view: Given that the previous two-week hot streak for fund inflows occurred near the market top in 2000, near the peak of the dot-com bubble, January's inflows could mark a similar peak.

"While investors watch where the so-called smart money is heading, individual mutual fund flow trends have not historically earned that title," Mr. Kozey said in a note. "In fact, the retail crowd has often jumped onto certain trends at precisely the wrong time, including the technology stock run-up to the March, 2000, market highs."

If you share this skepticism, at least there's some good news: The two weeks of inflows in the first half of January is not enough to be pronouncing a significant shift out of bonds and into stocks. It could be a blip.

As Mr. Kozey noted, annual and quarterly re-balancing activities can cause distortions and provide a false signal of a rotation into stocks. If that's the case, and investors remain wary, then contrarians can rejoice: Maybe this bull market still has some life left in it.

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