This $7 Trillion Pile Won’t Save the Bulls
Equity investors should give up on hopes that cash in money market funds will move into stocks on a pullback.
Spin the wheel.
Photographer: Alex Kent/Bloomberg
The money-market industry just reached a significant milestone with Crane Data reporting that these cash-like funds have amassed a record $7 trillion in assets. There are many ways to think about this development. One notion is that this huge sum represents “cash on the sidelines,” waiting to be unleashed into stocks, further fueling a bull market that has pushed major indexes to record highs. The idea is misguided.
A rudimentary Google search reveals that pretty much since the first money market fund was created in 1971, each new milestone has fired up equity market bulls. Their premise is simple: Who in their right mind would let cash sit in some fund earning miniscule interest rates thrown off by the safest investments including Treasury bills and commercial paper when there are infinite riches to be had in stocks? Surely these investors, or rather households, must be waiting for stocks to pull back before putting their cash into the market!