16 OCTOBER 2025
Is an equity market melt-up more likely than a melt-down?
For all the talk of frothy valuations and sentiment extremes, this year’s stock market rally appears pretty unloved.
The chart below shows how US money market balances continue to surge and now total well above U$7trn.
This is a good proxy for investor positioning because it shows cash holdings that could be owning bonds or equities instead.
So the scale of this upturn is firmly at odds with stock markets being on the verge of a major crash.
Typically, big drawdowns in risk assets only occur after investors have gone “all in” and have little cash left to invest.
With money market balances currently at record highs this suggests, if anything, a lot more buying power can be deployed into equity markets, particularly with the Federal Reserve now cutting interest rates.
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