The ETF tea leaves are an opportunity to put on your market contrarian hat. "When sentiment is too bullish, securities can be priced to perfection and ripe for a sell-off," Rosenbluth said.
But it would be just as bad to do the market math this way: November ETF record + September 2008 record = impending crash.
CFRA has an S&P 500 12-month target of 2335. (The index closed at 2253 on Wednesday.) CFRA thinks there is upside price-appreciation potential in the year ahead; it just may be limited.
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Record months for U.S. equity ETF inflows should take you back to a fundamental question about being in the market: What are companies doing to create value that will flow through to earnings?
If you can't come up with an answer to that question, then that's the worst signal of all.
Here are a few S&P 500 stats from S&P Global Market Intelligence:
- On a trailing basis, the S&P 500 is trading at an elevated price-to-earnings ratio of 19.5x 2016 estimated operating earnings per share, or a 13 percent premium to the quarter-century median P/E ratio.
- The P/E on trailing GAAP EPS is at a 26 percent premium.
- The P/E on forward 12-month EPS is 17.2x versus the average of 16.2x since the end of 1999, according to S&P Capital IQ.
Mitch Goldberg, president of investment advisory firm ClientFirst Strategy, said he isn't worried about the rally that led to the massive ETF rush or that noted market gurus, like Jeremy Siegel of the Wharton School, have called "98 percent Trump."
"I know everyone wants a binary market call of whether we have come too far too fast or if there is more to go," Goldberg said. "But what investors need to look out for are the conditions pushing stocks higher and bonds lower. Are those ending, or are they evolving in a way that adds to the positive sentiment?"
Here are a few of his reasons to not doubt current market buying:
- A lot of the potential returns for 2017 are being pulled into 2016.
- Earnings are on the rebound after several quarters of negative growth.
- Energy earnings clearly bottomed out.
- The banks are leading.
- The Fed is hiking.
- Q3 GDP came in over 3 percent.
"It started before [Trump]," Goldberg said. "It is a mix of fundamentals improving and the belief Trump's policies will accelerate things." He added, "Either way, companies are giving investors a reason to own their stocks."
Just don't include record ETF flows among them.