Record $77.4bn pours into equity funds in January: TrimTabs

While both US equity funds and global equity funds received record amounts of new money, David Santschi of TrimTabs warned in a report to clients that "these unprecedented inflows should concern contrarians because the stock market tends to perform poorly after such heavy buying."

On average, the Standard & Poor's 500 fell 0.8 percent in the three months following the previous nine largest monthly inflows into equity mutual funds and exchange-traded funds, and three-month returns were negative after six of those nine months, Santschi said.

"Four of the biggest inflows occurred in early 2000, right when the technology bubble popped," he added.

The record inflows come as encouraging US economic data, particularly in the labor and housing markets, are lifting investor confidence. Additionally, investors are strategizing to avoid higher tax rates on stocks that they might suffer in 2013 and beyond.

Yet that confidence could be tested in coming months when the government decides on possibly sharp spending cuts. The US Federal Reserve this year could also begin to reverse its ultra- easy monetary policy, which has boosted stocks.

Santschi said some of the inflows were likely due to the investment of bonus money received in December, much of which was pulled forward from January and February to avoid tax increases.

"Investors were also probably putting money back to work in equities after they sold late last year to take advantage of lower tax rates," Santschi said. "But we think the biggest factor is simply that investors are becoming more upbeat."

Inflows into equities did not slow much as last month progressed. On the past five trading days, all equity mutual funds and ETFs raked in $25.6 billion, Santschi added.

Breaking down January's inflow, $39.3 billion poured into US equity mutual funds and ETFs, topping the previous record of $34.6 billion in February 2000.

Meanwhile, $38.1 billion flowed into global equity mutual funds and ETFs, easily smashing the previous record of $27.1 billion in January 2006.

Bond mutual funds and ETFs posted big inflows as well, raking in $31.4 billion, of which $30.7 billion flowed into bond mutual funds. But last month's inflow was nothing spectacular historically and represents a return to trend after the drop in inflows amid the backup in yields in December 2012.