Reuters on $6 Trillion Cash Hoard
Reuters writes "A $6 trillion cash hoard could fuel more U.S. stock gains as Fed pivots." It explains, "Investors wondering whether markets can continue their torrid rally are eyeing one important factor that could boost assets: a nearly $6 trillion pile of cash on the sidelines. Soaring yields have pulled cash into money markets and other short-term instruments, as many investors chose to collect income in the ultra-safe vehicles while they awaited the outcome of the Federal Reserve's battle against surging inflation. Total money market fund assets hit a record $5.9 trillion on Dec. 6, according to data from the Investment Company Institute." They quote Flavio Carpenzano, fixed-income investment director at Capital Group, "If you think the Fed is done with the hiking cycle, then it's time to deploy cash as the opportunity is there." The piece explains, "Not all the cash in money market funds may be available as 'dry powder' to be invested in stocks and bonds. Some of it is held by institutions that might otherwise have that money in bank deposits and is needed for cash purposes, said Peter Crane, president of Crane Data, which tracks money market funds. History also shows that the bulk of cash in money markets tends to remain even as rates come down, said Adam Turnquist, chief technical strategist for LPL Financial. 'I think you could start to see some flows come out of money markets and chase this rally, but I don't think we are going to see anything to the tune of a trillion dollars or some massive flows that some people might expect,' Turnquist said. And while money market assets are at record highs, their size relative to the S&P 500 is smaller than it has been during past peaks. Total money market fund assets as a percentage of market capitalization stand at about 15.5%, in line with the long-term median and well below the record high of 64% hit in 2009 in the aftermath of the global financial crisis."
