Smart investors used to be able to identify market tops and bottoms by watching the weekly flows of money into and out of mutual funds.
Then came the stampede into exchange-traded funds, and the crystal ball for predicting market shifts grew cloudy.
Because weekly flow data now measures not just money moving into or out of mutual funds or between stock and bond funds, but also between one type of investment product (stock mutual funds) and another (lower-cost ETFs), the data has lost much of its usefulness for gauging small-investor sentiment toward equities in general.
Strategists still keep close watch on the aggregate weekly flows into or out of U.S. stock-focused mutual funds to get an idea of what individual investors are doing on a macro level. Some 95% of long-term mutual-fund assets (which includes around $10 trillion in stock funds) are owned by retail investors, according to estimates from the Investment Company...