There two different worlds when it comes to liquid assets: Banks deposits and Money Market funds. Since the Fed started rising interest rates, Money Market Funds have attracted the bulk of savings and liquidity in detriment of deposits, mainly because banks haven’t been able to compete in rates, as their low-yielding Assets are still locked at low rates acquired during ZIRP. That has implications for loans, as they need deposits to fund them. Money markets funds however, have been able to adjust as the Fed was hiking and have reached $6.8Tn even as the equity market was hitting new highs. Is this a bullish reading, where those are investable assets waiting for an entry point or are these risk averse assets that will only grow, particularly if indexes adjust downward due to high valuations? This is a great indicator to watch.
Want to know more? join Fund@mental here https://www.myfundamental.net
Comments