If the time horizons of investors are predominantly long, correlations on assets should be low in the short-run, because investors don’t make decisions to trade off of short-term macro factors. But when a large part of the investor base is skittish and is always running to or from the latest bit/byte/bite of data – that leads to high correlations.
ETFs aren’t necessary for high correlations, but they seem to help the process by creating easy ways for people to implement decisions that are a simple idea. “I want financials, I don’t want energy, buy the long bond, sell gold.”
Thus high short-term correlations indicate a momentum mindset in the investor base.