There’s a lot of cash on the proverbial sidelines. Still. There’s still a lot of cash on the sidelines.

I get questions occasionally about money market fund assets, which I used to cover on a weekly basis. I stopped covering the weekly inflow/outflow updates for one simple reason: It was the same story week after week, which is to say AUM just kept climbing.

Consider that global MMF AUM was under $4 trillion pre-COVID, it was $5 trillion in 2023 and it’s $8 trillion now.

For the better part of two years, one pillar (I won’t call it a load-bearing pillar, it was more decorative) of the bull case for equities was the notion that as the Fed cut rates, some of that cash would invariably find its way into stocks. That never really panned out, or at least not to such a degree that it manifested as a large net outflow from MMF funds.

Now we’re back in a scenario where the Fed’s raising rates. Even if The White House succeeds in ensuring September’s hike was a one and done affair (Donald Trump’s conducting quasi-inquisitions of Fed board members now, and apropos of something, Ilhan Omar’s home was raided Monday by federal agents), excuses for rate cuts will be hard for Kevin Warsh to come by.

At the same time, the Fed’s counterparts across the developed world are raising rates too. Indeed, BofA’s tracker which takes the three-month rolling total of global hikes minus cuts flipped net positive this year.

With all of that in mind, consider the figure below. And you’ll forgive me if you’ve already seen it: I’m scraping the barrel here. Monday was a bond market holiday stateside and there wasn’t a lot going on as a result.

As you can see, the week to October 7 (the latest weekly stretch for which data’s available) saw the largest one-week influx to money funds since April of 2020, when developed economies were handing out free money and suspending tax collections and citizens were hoarding cash for the pestilent end times.

Similarly, ICI’s data for US money funds revealed an enormous $72 billion haul, the vast majority to government funds (prime funds are long since passé).

The figure on the left, below, from BofA, shows you the trajectory of total global MMF AUM since the GFC.

The figure on the right is just Fed funds with the rolling six-month change on the same MMF AUM series.

The bank’s Michael Hartnett summed the situation up concisely. “Cash on the sidelines stays on the sidelines until big monetary easing and/or sustained Fed cuts,” he wrote. “No rate cuts, no cash cuts.”

Meanwhile — and I mention this from time to time because it does have some explanatory power for the “resilient” US consumer narrative — that cash pile generates a significant amount of interest income.

Hartnett did the math. Money funds, he remarked, almost casually, are “spinning off $330 billion in annual interest income with T-bill yields at 4.2%.”