According to Lipper, stock mutual funds have seen inflows of $167 billion so far in 2013, after outflows in 2011 and 2012. That's good news, but it is hardly a surge. Although $167 billion seems like a lot of money--and it is--it is only about two percent of the $7.2 trillion in stock mutual funds. That is not a tidal wave.
And what about the "Great Rotation" out of stocks into bonds? Not yet. Taxable bond mutual funds have also seen inflows of $42.5 billion this year, continuing a streak that goes back to the financial crisis.
The concern that optimism on the markets is increasing is real. Sentiment is certainly improving. Put/call ratios, volatility indexes, and surveys of investor bull/bear sentiment are all flashing complacency.
Citi's analyst, Tobias Levkovich, sent a note this morning declaring "the Panic/Euphoria Model is sending a clear warning sign of substantial complacency." This proprietary indicator, he claims, is not yet in Euphoria territory, but even where it is now, there is an 80 percent chance of a decline in the markets in the next year.
However, that's a long time--a year. Meanwhile, he doesn't say how big a market decline it might be.
Euphoria doesn't necessarily mean declines. Ron Baron held his annual investment conference (at Lincoln Center) over the weekend, and reports indicate he remains bullish on stocks, expecting inflation to pick up and expecting stocks to continue to outperform.