Some analysts say a big-picture trend presently unfolding involves hedge funds and other players unwinding bets on commodities/foreign currencies and plowing the proceeds into U.S. financial and other stocks. They are doing this for valuation reasons and as a haven against weakening economies overseas.
There is some evidence it at least partly reflects hedge funds scrambling to raise cash to meet redemption requests. Financial stocks have risen for sure but that likely reflects hedge funds buying back short positions to generate cash, not to go long because they think the fundamentals are turning.
I remain somewhat skeptical of the thesis that the U.S. economy is close to coming out of the downturn, and so the places to shift into are U.S. stocks and the U.S. dollar. When one looks at the problems the U.S. has, especially in its financial sector, they would seem to have the potential to inflict more pain on the economy than we have seen to date.
Cash balances in hedge funds rose to a record $155 billion (U.S.) in July. A lot of this could be coming out of the market and going into investors hands. It may be erroneous to assume it will all be going into U.S. stocks.