Two cash indicators are showing extremes: on one end, mutual fund managers have the lowest level of cash on their portfolios since mid 2021 (see chart below). As the equity market is showing the best YTD performance of any presidential year ever, managers need to remain fully invested to avoid performance drag. On the other end, money market AUMs have reached $7Tn, taking money from bank deposits, based on almost 500 bps difference in yield between both. That means investors have $357Bn in interest payments this year alone, ready to spend. And perhaps that’s why inflation is so sticky. The dynamic between the two cash masses will likely define the performance of the year. Will cash chase performance or will invested money look for money market security?
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