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5% Versus FOMO
Will there or won't there be a rotation out of money market funds and into stocks?
Maybe that's a tired debate by now. I'm a little tired of it myself if I'm honest. But don't expect it to go away anytime soon. Not with more than $6 trillion (total MMF AUM) on the line.
Last week was interesting on the flows front. Both MMFs and equities saw large outflows, with US shares witnessing the most pronounced one-week exodus since December of 2022 ahead of the March FOMC meeting.
Of course, both mon
I am curious what other investment managers are hearing from their customers. During the course of this rally, I can only recall one customer asking if we should be increasing his equity weighting.
Many more have called in to discuss whether to take some equity money off of the table. That is mostly driven by their perceptions of the political chaos here and globally.
That 5% makes reducing equity weightings more palatable than it was when short rates were at .5%.
@derek, two clients have asked about taking more equity exposure vs no-one asking about reducing equity exposure. However, clients saw equity exposure slashed in late 2021 so they may assume that can happen again.
On the article topic, perhaps money funds will, or should, start losing assets to duration. You can get 5% for a few more months in MMF then watch yields fade, or you can lock in a similar YTW for 4-6 years in agencies and IG corporates, with most likely some capital gain opportunities along the way. I see that taxable + muni funds pulled in >$100BN YTD through Feb (per Morningstar).
Thanks. I wonder what RIA is seeing.
BW – the ratio here was 1 versus 20 easily. But we have a pretty wealthy clientele who are not looking to make a fortune in stocks because they have already done so in the real world. Or through lucky DNA.
Hmm, that (1:20) is very interesting.
Your first line immediately reminded me of the “Lobster Quadrille from Alice in Wonderland (surely where we actually are),”Will you, won’t you … come and join the dance?” I’m a 5% er now. I will play the rate fade later but never into stocks.