What matters: The S&P 500 index is sitting at 4.5 year highs. It's been a good week for stocks. S&P 500 up 1.4 percent, and the Dow transportation average has been outperforming the industrials three days in a row, after underperforming for three months. The transports are up 2.4 percent this week versus 1 percent for the industrials.
Headline economic data has been better: ISM, ISM Services, auto sales, all a bit better than expected. And September retail sales — while not as strong as August — were certainly respectable, up 3.9 percent year-over-year.
Still, it's at best 2 percent gross domestic product growth.
1) The front page of The Wall Street Journal has an article by E.S. Browning this morning noting that investors continue to pull money from stock mutual funds. It goes through the usual litany of why investors are unhappy with stocks: The global slowdown, the 2008 financial crisis, lack of returns for the last decade, scandals, high frequency trading.
It's certainly true there are high levels of investor dissatisfaction with stocks, but be careful about just looking at stock mutual fund inflows.
I was speaking with Paul Hickey at Bespoke this morning, and he agrees there are other ways investors are getting exposure to stocks and stock-like investment vehicles:
1) Exchange-traded funds. Some ETF trading is certainly being used by traders with short-term trading strategies, but every major fund company from Charles Schwab to Vanguard to Fidelity offers them to their investors. According to ETFGI, North American equity ETFs/Exchange-traded products have seen net year-to-date inflows (through September) of $58.6 billion.
2) Hybrid funds. More money is going into hybrid or balanced funds; they tactically allocate money between stocks and bonds. Managers make the decision on how much should go to each asset class, but I will bet that more managers are allocating money to stocks lately. According to ICI, Hybrid funds have seen net inflows of $39 billion through August.
3) High-yield bond funds. These are bond funds, but as every astute investor knows, they tend to act like stock funds, particularly in times of high volatility. Investors have been pouring money into these funds.
—By CNBC’s Bob Pisani; Follow Him on Twitter @BobPisani
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