One of the pressing questions headed into 2024 was this: What’ll become of the $6 trillion parked in money market funds?

Beneath that overarching query are myriad additional inquiries, some of which relate to the proverbial “plumbing,” which is to say this is a discussion with systemic implications.

A simpler, weekend-friendly debate revisits the idea that a portion of that “sideline” cash might be tempted by the never-ending run up in equities.

It’s true that sleep-well-at-night government money funds yield the most in decades, making cash a viable — indeed a competitive — asset for the first time in a very long time. But… well, 5%’s not 30%, let’s put it that way. And the S&P’s up almost 30% since the October lows.

Notwithstanding an anomalous outflow in the week to Wednesday, there’s scant evidence to suggest an exodus from money funds is imminent. The YTD inflow to US MMFs stood at an impressive $160 billion even after $62 billion of redemptions over the latest weekly reporting period. Some believe an influx of corporate cash will drive total MMF AUM meaningfully higher by year-end.

But what about households? Last year, the household sector was a net seller of US equities for the first time since 2018 amid ongoing inflows to money funds. Could that dynamic reverse in 2024? Goldman thinks so.

As the figure above shows, the smartest folks on the Street expect the household cohort will flip back to net buying in 2024, with MMFs serving as a source of funds.

“The record amount US households hold in money market funds suggests they have ample capacity to purchase equities,” the bank’s Cormac Conners wrote, in a new note.

Households have nearly $4 trillion in US money funds (figure on the left, below), the most ever and $1.5 trillion more than pre-pandemic.

Importantly, though, quite a bit of the cash stashed in MMFs since March of last year is indicative of a substitution effect, as illustrated by the chart on the right, above. As Goldman noted, that cash is less likely to be deployed into stocks.

“Within cash assets, households rotated sharply toward money market funds and away from checking and savings accounts in 2023,” Conners wrote. “This rotation was most acute during 1Q23, as fears of a widespread banking crisis spread suggest[ing] that a segment of last year’s money market inflows reflect a reallocation of deposits.”

The figure below shows the granular breakdown of household flows to cash products by quarter.

Simply put: If you moved your savings account to a money fund last year, that balance probably isn’t going to end up in stocks. It’s your savings after all.

But that still leaves plenty of room for MMF balances to fund equity-buying. Or at least according to Goldman.

“Despite deposit migration flows, a substantial segment of household money market balances are available be deployed into the equity market,” Conners went on, noting that MMF AUM was already up sharply before the regional banking drama.

The key point is this (from Conners:) “The practical and psychological barriers to deploying cash from money market funds into stocks are lower than from traditional bank accounts.”

Even if you exclude all of the household MMF inflows since last March (on the assumption households consider those balances tantamount to “untouchable” savings), you’re still left with a lot of cash sitting in accounts where the logistical and psychological hurdles to shifting into stocks are lower versus bank savings accounts.

Goldman expects a net $100 billion in net equity demand from US households in 2024. That’s not even 3% of household MMF balances, which is to say the bank isn’t positing an unrealistic dynamic, particularly given that the onset of Fed cuts could serve as a catalyst.

But aren’t household stock allocations already high? If so, isn’t that an impediment to additional stock-buying? “Yes” on the first question. “No” — or not necessarily — on the second.

As the figure on the left below shows, household equity allocations are indeed elevated. And “elevated” is an understatement in this case. But the scatterplot on the right suggests little in the way of predictive value.

Although the current household equity allocation to stocks, at around 48%, matches that seen on the eve of the dot-com bust, that only suggests a limiting effect, not an outright impediment.

As Conners put it, “elevated allocations may limit equity demand going forward [but] high starting equity allocations have not historically been a predictor of weak forward demand.”

Still, I’d be remiss not to note that in the event stocks do sell off, the fact that households’ stock allocation matched the dot-com peak ahead of any correction would be cited (and lampooned) by Hindsight Capital: “Who could’ve seen this coming?”