Meanwhile, on the flows front.
US money market funds just saw one of their largest weekly inflows on record, a monumental $120.80 billion in the week to September 26.
The enormous influx followed a rare outflow which coincided with a corporate tax date.
As you can imagine, the vast majority — $110 billion — was attributable to the institutional government category.
The mountain of cash parked in US money funds now stands $6.42 trillion tall.
For context — and as the figure shows — last week’s haul was on par with the periods ending March 15 and March 22 of 2023, when the turmoil around SVB’s failure triggered huge MMF demand.
If you’re curious, money market fund outflows tend to start around nine months after the Fed commences rate cuts. Some suspect a MMF-to-equity rotation could begin as soon as Q4. We’ll see.
A word of caution: Not all, nor even most, of that $6.4 trillion is “available” for stock-buying. Some of that cash stash is bank deposit / savings substitution. And as Bloomberg’s Alex Harris noted, in the course of recycling her own copy almost verbatim (no offense, Alex, I do it all the time), “institutions and corporate treasurers tend to outsource cash management” during policy pivots.
The point (my point): Private savings and corporate cash isn’t likely to find its way into risk assets, or at least not into equities.
But some money sure is — finding its way into equities, I mean. Global stock funds took in another $25.4 billion over the latest weekly reporting period, according to EPFR. The split was $32 billion to ETFs and $7 billion from mutual funds.
The latest inflow came hot on the heels of a $39 billion haul which counted as the third-largest of the year.
And what a year it’s been. The total net inflow to stock-focused ETFs and mutual funds in 2024 now stands at nearly $452 billion.
US equities took in $11 billion over the week. As BofA’s Michael Hartnett noted, US stock-focused funds are annualizing a $363 billion inflow. If realized, that’d be the second-largest on record.
There seems to be a trend in these numbers. Is money regularly coming out of mutual funds because people are starting to draw on their IRAs en masse–or something like that–or is there an actual rotation going on out of mutual funds and into ETFs (and if so, why?)
Ha, it’s a trend all right. In fact, it’s an epochal trend. In some respects it’s the only trend that matters. And no, it has nothing to with retirement funds. It’s the active-to-passive shift. Nobody wants to pay 100bps to an active manager when you can pay 5bps to track benchmarks that never fall.
Here’s what that trend looks like on a longer horizon: https://heisenbergreport.com/wp-content/uploads/2024/08/ActiveVsPassiveBofAAug2024.png
Again: Epochal.
I’m not clear what advantage MF have over ETF. They are functionally the same for the customer, except that ETFs trade like water and don’t stick you with a big year-end tax bill.