Investor money gushed into stock-based funds during the first full week of trading in 2018, another potential trigger sign of an overheated market.
"The bull capitulation begins," Michael Hartnett, chief investment strategist at Bank of America, said in his weekly fund flow roundup.
The numbers were stunning for a week during which stocks added around 1 percent to the already eye-popping gains that began shortly before the November 2016 presidential election.
Stock funds raked in $24.4 billion for the week through Wednesday, a total that Hartnett called "blockbuster" and was spread across the equity spectrum. It was the sixth-biggest equity inflow total ever and the most in at least six months.
The total was diverse geographically — $6.4 billion to the US, with $3.2 billion to Japan, $2.2 billion to Europe and $4.3 billion to emerging markets, the largest inflows for that group in 73 weeks. There also was some dispersion between active and passive strategies.
Exchange-traded funds, a mostly passive group that tracks market indexes like the , have been attracting the bulk of investor cash during the nearly nine-year bull market run, while active funds have seen continuous outflows. However, active mutual funds garnered $2.1 billion of the weekly inflows to start the year.
"Investors are unambiguously long and will likely stay so until rates go up and/or [earnings per share] goes down," Hartnett said.
There was plenty of cash to go around, even outside stocks.
Corporate and emerging market bonds raked in $13.1 billion, with EM debt showing its second-biggest ever week of inflows. Tech funds also saw a big jump, with their second-best week ever, while high-yield bonds attracted $1.5 billion in fresh cash, the biggest inflows in 48 weeks.
Hartnett reported that BofAML's "Bull & Bear Indicator" that keeps a watch out for extremes in investor sentiment, is nearing a sell signal.
To be sure, the bull run can continue for an extended period of time even with elevated enthusiasm and the rush of cash, in particular because of the low level of retail investor participation throughout the rally. Low-yielding money market funds still hold $2.84 trillion in cash, a number that has barely budged over the past year.
Also, the big early January run could be the result of seasonal factors.
"The fund flows figures are going to capture the start of the new year, with new 401(k) contributions a big part of it. That tapers off as the year gets older," said Art Hogan, chief market strategist at B. Riley FBR. "If this was the first or second week of August or September, when seasonality slows down, I'd be be much more concerned."
Hogan has a 3,000 year-end target for the S&P 500 — about an 8.5 percent gain from Friday's open — that he feels will be hit even though the market likely will see higher volatility in 2018.
"I think it's more of a seasonal trend than it is that sort of euphoria or concern that you're seeing the wrong money coming in at the wrong time," he added. "I'd wait until the seasonality flattens out before you jump to a conclusion that you've got money crashing into the markets at the highs."