With data as of last week, ICI's tally of equity fund flows shows no net inflows for the past two months, even as equity prices have hit new all-time highs. Bond funds, meanwhile, continue to enjoy strong inflows, even as bond yields remain very near all-time lows. Mutual fund flows thus reflect a market that is still dominated by caution.
The chart below is a reminder of just how low 10-yr Treasury yields are from a long-term historical perspective:
The chart below is a reminder that the real yield on TIPS tends to track the economy's health:
Negative real yields imply that investors have very pessimistic assumptions for economic growth over the next few years. This jibes with the dearth of equity fund inflows. There is a real shortage of optimism out there.