There has been much discussion about fund flows into domestic mutual funds in the past few weeks for one simple reason: there have been inflows into domestic mutual funds (as tracked by ICI [5]). For some reason, pundits correlate this inflow with the move higher in stocks. What remains unsaid is why there was little to no discussion of fund flows into domestic stock funds for about 90% of the time in the past three years. The reason is just as simple: there were no inflows, as can be seen on the chart below. There were, however, other "exogenous" events during this time: such as QE2, LTRO 1 + 2, Draghi's whatever it takes language and Operation Twist of course, and then QE3 which will likely continue indefinitely and be replace by QE4 the second it is fully "tapered." So what is relevant: inflows (or, gasp, outflows) or whatever central banks do? You decide.
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