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Bullish strategists often quote a $ 6.9 trillion peak in the money market funds as a potential fuel for stocks.
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But the surge may not be money market cash because investors are waiting to stack to stock.
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Prose DIP buyers do not yet see any deals as the stock market declines on concerns of fading economic growth.
Wall Street strategists in the past year have distracted A key reason Stocks are likely to continue pushing higher: the mountain of cash on the sideline.
There is a $ 6.9 trillion highlight in money market funds, according to data from Bank of America. The theory goes that as soon as the stock market sees a compelling dip, investors will rush in, use their money and prevent any deterioration from spinning out of control.
The steam idea won in September when the Federal Fund began to cut interest rates, which made holding a slightly less attractive cash. It was hoped that as products on safer assets came down, investors would flock back to the stock market and trigger a new run of earnings.
But if the bulls count on “Silver Wall” To save the stock market during its next big sale, they may adjust their mind.
Here's why.
The problem with this BIF the bull's essay is that much of the increase in assets in the money market funds is driven by cash optimization decisions among investors, according to Jay Hatfield, CEO of infrastructure capital advisers.
“During the rising period of money market assets, Level M1, which included checking accounts but not money market assets, declined over $ 2 trillion, noting that optimization activity was primarily the increase in money market balances and not a risk reduction activity,” Hatfield told BI.
That is, investors took advantage of 5% cash products by transferring their money out of low -producing bank checking accounts and transferring it to money market funds.
As long as a cash product does not break down, it is unlikely that cash on the sideline will seek investment opportunities.
And even if the product had fallen to 0%, that probably means the economy is in trouble, in which case investors will probably not want to move their risk-free money to a more volatile asset like stocks.
According to Larry Tentarelli, chief technical strategist in the Daily Blue Chip trend report, the $ 7 trillion record in cash is not all an impressive amount, at least relative.
Data analysis by Tentarelli showed that a cash market cash has been constantly declining as a percentage of the total capitalization of S&P 500 market even as the absolute number has reached records.