Stock market bulls have been pointing to this chart as a reason to remain bullish but I wouldn't be so sure. It shows money market funds climbing steadily since 2017 and tripling over that period.
The argument is that all the money that's parked in short-term cash funds will eventually find its way into the stock market, particularly as the Fed cuts rates and money-market returns dwindle from 4.15% currently to around 3%.
Looking at the chart, it seems as though people are scared and holding cash but when the animal spirits truly come out, that will all pile into stocks in some kind of 1999-style blowoff.
Here is why it might not be so straight forward. While money-market assets have tripled in that time period, so has the S&P 500. In fact, as a percentage of the S&P 500, money market funds are at 15% compared to a normal long-term average of 20%. The size of the fixed income market has also grown dramatically given the rise in US (and other sovereign) debt.
In short, the 'money on the sidelines' may not be there.
This article was written by Adam Button at investinglive.com.Hence then, the article about why this chart is deceiving was published today ( ) and is available on forex live ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
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