What if mutual funds and index funds did their job

U.S. stocks at the end of March posted their best quarter in nearly a decade, but they did so without help from investors in U.S. stock mutual funds and exchange-traded funds, which have seen sizable outflows since the start of the year, according to data from Lipper and EPFR global.

Imagine that we have a net flow to or from a working equity ETF.  First, all things being equal and one sided we would expect no change in the stock market, we would expect the ETF to be nearly orthogonal to stock prices if it is a true index.

The other half of the answer is where is the money going. If money is going somewhere then it loops back on stock prices , and there is your answer.

And the third part of the answer this article covered, the index has to adapt because elements in their index are exchanging places in the market itself.  Hence, no ETF keeps a perfect match and we expect inversion now and then.