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History Doesn’t Support Cash-To-Stocks Rotation Narrative
Will record-high money market fund AUM be deployed into equities now that the Fed's cutting rates?
Wait, that's not bombastic enough. Let me dramatize it for you.
With cash yields set to drop precipitously, will the Everest-tall mountain of money sitting "idle" on the sidelines serve as a source of funds for an epic, FOMO rally that sees the S&P gallop higher into year-end and beyond?
I'm so tired of that question, however posed, I can barely stand to address it anymore. The answer -- my
“pre-hazed” – Ha!
I prefer my research associates “post-hazed”
Before I read the comments I was going to mention the haze.
I would kill for pre hazed associates.
I think the only useful clue on cash available and likely* to be re-allocated to investments is the “cash percent” reported in various investor surveys e.g. BAML’s.
I guess I am an ass who is part of the masses.
I am closer to the $65,000 mark than the $500,000 mark per year, but I do not find it a struggle to live at that level. So I will cry over the 11 year old Mazda 3 I gave up for a new electric vehicle. I do have fond memories of that car and it’s predecessor a Mazda Protoge. In all I drove mazda gas burners for over 20 years. I traded down to a new Hyundai Ioniq 6 with a misfit hood, 2 years complimentary charging. I got $20K in government and Hyundai incentives to help my purchase along.
I do feel entertained by the article however including the obligatory chart and historical probability analysis.
Thank you.
The Ioniq 6 was on my shortlist (I ultimately went with Polestar). It sounds like you’re not too happy with it?
So much cash out there!!
It seems like both higher rates and lower rates can drive different parts of the economy- so, therefore, short of a recession – the S&P 500 will continue to hoover up that cash.
Regardless of the election outcome, fiscal stimulus and more government jobs will be part of the economic outlook (at least for the next 4 years), so I am thinking that the stock market will benefit from “trickle up” economics.
Much of the cash held in mmf is disintermediated from the banks. Many large money center banks pay very low rates, far below mmfs. That money may head back to the banks. Some will go into bonds when the short end of the curve ‘disinverts’. A fairly small amount of it may go into stocks. Don’t hold your breath.
Another problem with the “cash coming off the sidelines” argument which has always bugged me is that the assets backing those money market funds have to be held by someone. It’s not like I cash out $10,000 from my MMF to buy NVDA shares and the fund manager sends the equivalent amount of T-bills back to the US Treasury. “Hey, we don’t need these any more, you can have them back.” Those bills get sold, and the cash to buy them has to come from somewhere.
I’ll wager that a good amount of that “cash” is being held by corporations vs private mom and pop types.