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Investors are increasingly putting their money into money market funds.
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A multi-trillion dollar flood into the fund comes when risk-free interest rates rise to 5 percent.
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Bank of America believes this “mountain of money” will help fuel a year-end stock market rally.
Our chart of the day is from Bank of AmericaThis shows that investors are still piling into money market funds as interest rates rise.
The chart shows that net assets of all money market funds rose by $5.625 trillion last week, as investors sought a 5% risk-free rate rather than risking their money by buying stocks. Bonds.
“Investors love cash,” Bank of America’s Stephen Suttmeier said in a note on Tuesday.
The increase in interest rates will come after a year The Federal Reserve began its tightening cycle To control inflation.
Now, most money market funds offer a net yield of about 5.1%. By contrast, during the 2010s, when money market funds had between $2.5 trillion and $3 trillion in assets, rates were at or near 0%.
But Bank of America believes capital flows could change, with the current record volume in money market funds representing a potential boost for stocks.
“A mountain of money could fuel a year-end rally,” Suttmeier said, adding that current trends favor a move higher in stocks.
“The money is reduced by 5% every year S&P 500 16.9% returned. As the S&P 500 may continue [to] Growth after strong returns [the] A strong first half and year-to-date rally in August would not surprise us to see investors put money to work and burn the rally into the year.
Read the main article Business Insider
