01 FEBRUARY 2024
This is likely to be one of the most important charts to monitor over the coming weeks. It shows the total amount held in US money market funds so is a good proxy for general risk appetite and investor positioning.
As you can see, the balance has surged over the past year to a record U$6trn as many investors have been attracted to the decent yields being offered by cash and cash-like instruments; a direct result of the spike in interest rates since early 2022.
However, that trend is now reversing with money market and short-dated bond yields down significantly from their mid-October high. Whilst the returns from these low risk assets remain attractive in the context of the past decade or so, some investors could be tempted to switch their cash balances back into equities and other risk assets, given the prospect of higher returns.
After all, markets tend to be driven by “greed” and “fear” and these extreme money market balances suggest we haven’t yet seen the “greed” stage of this stock market rally play out.
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Here you can find our latest Chart of the Week
