Something very interesting is happening to cash: weekly allocations to Money market funds have reached $140Bn, which is the second largest amount in history, after the peak during the pandemic in April 2020. At the same time, as you can see in the chart below, allocations to cash on Mutual funds have reached the lowest point in recorded history. Professional managers have reduced cash allocations to minimize its drag on performance, and basically are all-in. Investors, at the same time they allocate money to risk assets such as equity, are pouring money into money market that perhaps otherwise would have been sent to a bank to be invested in a time deposit, but their rates are not competitive, particularly for small banks. What signal can we get here? A bullish one on the fact that there’s a lot of cash waiting to be invested or a bearish one because managers are fully invested?
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