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With many of the major stock indexes hitting new all-time highs, a lot of "warnings" are being sounded that this rally is too much too soon.

Recently on CNBC, real estate investor Sam Zell compared stocks to the biggest housing boom in American history.

"This feels like the housing market of 2006," he said. "Everybody feels they can't afford to miss it."

Though he wouldn't predict where equities will go, Zell sees a strong resemblance to housing, telling CNBC, "We are suffering through another irrational exuberance." While daily headlines now trumpet new highs for the stock market, he said, seven years ago they were about the rise in home prices.

Where's the Exuberance?

Yet the money flow data doesn't support the idea that investors are pouring into stocks.

According to ICI, for the week ended April 3, just $1.25 billion went into equity mutual funds. $3 billion was put into world equity mutual funds and $1.8 billion was taken out of domestic funds. This was the week that the S&P 500 first hit a new high.

By contrast, bonds continued to be the investment of choice for mutual fund investors with inflows of $6.4 billion. Bonds have outpaced equity mutual funds in inflows all year.

The ETF data shows a slightly different story. In the month of March, $17 billion flowed into equity ETFs with the majority, or $16.6 billion, going into US and North American funds. Fixed income ETFs saw just $5.6 billion for the month but it is telling that investors continue to put money into bonds.

Many experts predicted a "rotation" from bonds into stocks this year but the data is showing that that is NOT happening. Bonds are as popular as ever.

Have we been so tainted by bubbles over the past 15 years, with the dot-com and then the housing bubble, that every bull market now seems like a bubble?

Or are investors truly throwing caution to the wind and being irrational when it comes to stocks?

 

 
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