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, David Randall, Saqib Iqbal Ahmed, and Lewis Krauskopf reported for Reuters.
Soaring yields have pulled cash into money markets and other short-term instruments.
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 December 6, according to data from the Investment Company Institute.
The Fed’s unexpected dovish pivot on Wednesday may have upended that calculus: If borrowing costs fall in 2024, yields will likely drop alongside them.
That could push some investors to deploy cash into stocks and other risky investments, while others rush to lock in yields in longer-term bonds.
Cash has returned an average of 4.5% in the year following the last rate hike of a cycle by the Fed, while US equities have jumped 24.3%, and investment-grade debt by 13.6%, according to BlackRock data going back to 1995.