For a long time, my thesis has been that the equity market was moving higher despite all the bad news and despite the very negative assumptions embraced by the capital markets. Stocks are not riding a wave of optimism; if anything, stocks are up because the future hasn't turned out to be quite as bad as the market had expected. Mutual fund flows continue to confirm this.
According to data compiled by ICI, there has been an impressive exodus of investors from domestic equity funds over the past several years, and there is no sign that this is getting any better.
Bond funds, in contrast, have been growing like Topsy ever since the crash of 2008. Investors continue to shun equity funds in favor of less risky bond funds, a clear sign that negative sentiment prevails.