01 AUGUST 2024
We first shared this chart in January, claiming “this is likely to be one of the most important charts to monitor over the coming weeks”.
That is because it shows the total amount held in US money market (cash) funds, so is a good proxy for investor risk appetite and positioning.
As we noted at the time, the balance has surged over the past couple of years, in tandem with the much higher rates now available on cash deposits and short-dated bonds.
Indeed, the total amount held in US money market funds now regularly exceeds U$6trn, more than double its pre-Covid norm and compared to just U$4.5trn a couple of years ago.
Why does this all matter?
These record high cash balances mean there is plenty of potential buying power sat ready to be deployed into equities and other risk assets if cash-heavy investors start to think they can earn a higher return elsewhere.
Major bear markets seldom start with investors holding so much cash and, at U$6.1trn, the money market balance is currently higher than when we first posted the chart at the start of the year.
However, there are tentative signs that it may have peaked so one to watch closely as we head into the second half of 2024.
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