{"id":2125994,"date":"2023-12-15T12:12:02","date_gmt":"2023-12-15T17:12:02","guid":{"rendered":""},"modified":"2023-12-15T12:17:13","modified_gmt":"2023-12-15T17:17:13","slug":"a-6-trillion-cash-hoard-could-fuel-more-u-s-stock-gains-as-fed-pivots","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/a-6-trillion-cash-hoard-could-fuel-more-u-s-stock-gains-as-fed-pivots\/","title":{"rendered":"$6 trillion cash hoard may boost US stock gains with Fed&#8217;s pivot"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">24<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fa-6-trillion-cash-hoard-could-fuel-more-u-s-stock-gains-as-fed-pivots%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=2125994&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p><!DOCTYPE html PUBLIC \"-\/\/W3C\/\/DTD HTML 4.0 Transitional\/\/EN\" \"http:\/\/www.w3.org\/TR\/REC-html40\/loose.dtd\"><br \/>\n<?xml encoding=\"utf-8\" ?><?xml encoding=\"utf-8\" ?><?xml encoding=\"utf-8\" ?><html><body><\/p>\n<div class=\"entry-content\">\n<p><strong>December 14,\u200d 2023 \u2013\u200c 10:04 PM PST<\/strong><\/p>\n<figure class=\"wp-block-image size-full\"><figcaption class=\"wp-element-caption\">The Federal \u200dReserve building in Washington, \u200cU.S., January \u200c26, 2022. REUTERS\/Joshua Roberts\/\/File Photo<\/figcaption><\/figure>\n<p><strong>NEW\u2063 YORK (Reuters) \u2013<\/strong> Investors wondering whether markets \u2063can \u2063continue \u200ctheir\u200d torrid rally are eyeing one\u200c important factor that could boost \u200cassets: a nearly $6 \u200btrillion\u200b pile \u2064of cash on the sidelines.<\/p>\n<div id=\"div-gpt-ad-1663871513696-art-3\" style=\"min-width: 320px; min-height: 50px; text-align: center;\">  \t<script>  \t\tgoogletag.cmd.push(function() { googletag.display('div-gpt-ad-1663871513696-art-3'); });  \t<\/script>  <\/div>\n<div class=\"ad-slot__ad-label\">Advertisement<\/div>\n<\/p>\n<p>Soaring\u200b yields have pulled cash into money markets and other short-term instruments, as\u2063 many investors chose to collect income in the\u2062 ultra-safe \u2063vehicles\u200b while they awaited the outcome of\u2064 the Federal Reserve\u2019s battle \u200cagainst surging inflation. Total money market fund assets hit a record $5.9 trillion on \u200dDec. 6,\u2064 according to data from the Investment Company \u2064Institute.<\/p>\n<p>The Fed\u2019s unexpected dovish pivot on Wednesday may have upended that\u2063 calculus: If borrowing\u2063 costs fall \u200cin 2024, yields \u2063will likely drop alongside \u200dthem. That\u2062 could push some\u2062 investors to deploy cash into stocks and \u2063other risky investments, while \u200cothers\u200b rush to \u200block in yields in longer-term bonds.<\/p>\n<p>Cash has returned\u200b an average of 4.5% \u200din \u2062the year \u2064following the last \u2064rate hike\u200c of a \u200ccycle by the Fed, while U.S. equities\u200b have jumped 24.3% and investment\u2063 grade debt by 13.6%, according to \u200cBlackRock data going back to 1995.<\/p>\n<p>\u201cWe are getting calls \u2026 from clients \u200dwho have a significant level of cash\u200d and are realizing they \u2063need to do something with it,\u201d said Charles Lemonides, \u200bportfolio manager\u2062 of hedge\u200c fund ValueWorks LLC. \u201cThis is the beginning of a cycle\u2062 that will start to feed on itself.\u201d<\/p>\n<p>Recent market action\u2062 shows the scramble to recalibrate portfolios may have already kicked\u2063 off. Benchmark 10-year Treasury yields, which move inversely to\u2063 bond prices, have fallen around 24 basis points since Wednesday\u2019s Fed meeting to 3.9153%, the lowest since late July.<\/p>\n<p>The S&#038;P 500 is up \u20621.6% since Wednesday\u2019s Fed \u2062decision and \u2062stands\u2062 less than 2% below a record high. The index is up nearly 23% this year.<\/p>\n<p>\u201cIf you think the Fed is\u200c done with the hiking cycle, \u2064then it\u2019s time to deploy\u200b cash as the opportunity\u2063 is \u200cthere,\u201d said Flavio Carpenzano, \u200cfixed-income investment director at Capital\u2064 Group.<\/p>\n<p>Not all the cash in <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/federal-reserve-chair-jerome-powell-takes-heat-after-admitting-economy-is-rigged\/\" title=\"Federal Reserve chair Jerome Powell takes heat after admitting economy is rigged\">money market funds<\/a> may \u200cbe available as \u201cdry powder\u201d\u200b to be invested in stocks and \u200bbonds. Some of \u200bit\u2062 is held by institutions that might otherwise have\u2062 that money in bank\u2062 deposits \u200cand is needed for\u200c cash purposes, said Peter Crane, president \u200bof Crane Data, which tracks money \u2064market funds.<\/p>\n<p>History also shows that the bulk of cash in money markets \u2062tends to remain even as rates\u2062 come down, said Adam Turnquist, <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/slumping-u-s-stock-market-technical-indicators-flash-warning-sign\/\" title=\"Slumping U.S. stock market technical indicators flash warning sign\">chief technical strategist<\/a> for LPL Financial.<\/p>\n<p>\u201cI think you could start to see some flows come out of\u200d money markets\u200d and chase this rally, but I\u2063 don\u2019t think \u2064we are going to see anything to \u200cthe tune of a trillion dollars or some massive flows that \u2062some people might \u2062expect,\u201d \u200cTurnquist\u200c said.<\/p>\n<p>And while money market assets are at\u200b record highs, their size relative to\u200b the S&#038;P 500 is smaller than it has been during \u200cpast peaks.<\/p>\n<p>Total money market fund assets as a percentage of market capitalization stand at about 15.5%, in line with the long-term median and well below the record high of 64%\u200d hit in 2009 in the aftermath of the <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/milton-friedmans-revenge\/\" title=\"Milton Friedman\u2019s Revenge\">global financial crisis<\/a>.<\/p>\n<p>For now, however, investors\u2019 appetite for risk has been easy\u2062 to spot. In the options market, for example, traders are \u2063spurning protection from a\u200d near-term drop in stocks even though the price of such hedges is attractive from a historical standpoint. The Cboe Volatility Index (.VIX), which reflects demand for insurance\u2064 against market swings, fell to pre-pandemic lows this month.<\/p>\n<p>\u201cNo\u200c one is interested in buying insurance,\u201d said Chris \u200cMurphy, co-head of derivative strategy \u2063at Susquehanna\u200b Financial Group, noting that the low level of defensive positioning leaves \u2064the market vulnerable to a sharp reversal in the event \u200cof an\u2063 unforeseen negative shock.<\/p>\n<p>Indeed, the\u200b sharp rebound\u2062 in\u2062 equities from their October lows has made some\u200d investors wary that markets have\u200c risen too quickly.<\/p>\n<p>\u201cThere\u2019s enough money out there that it doesn\u2019t take a lot to directionally move the markets higher,\u201d said Jason Draho, head of asset allocation, Americas, at UBS Global Wealth \u2062Management.<\/p>\n<p>Still, the\u2063 swift gains over the past six weeks in both equities and stocks \u201cmakes\u200d you a little concerned about where the upside\u2063 is from here for the markets overall,\u201d\u2063 he\u200b said.<\/p>\n<p><sup>Reporting\u200b by David Randall, Saqib\u2064 Iqbal Ahmed and Lewis Krauskopf; \u2063Additional reporting by\u2063 Dhara \u200cRanasinghe;\u200b Editing by\u2063 Ira Iosebashvili \u2064and\u2062 Leslie Adler<\/sup><\/p>\n<\/p>\n<div id=\"rc-widget-10bad2\" data-rc-widget data-widget-host=\"habitat\" data-endpoint=\"\/\/trends.revcontent.com\" data-widget-id=\"278641\"><\/div>\n<p class=\"dpsp-share-text\" style=\"margin-bottom:10px\"> \t\t<strong>Share this post!<\/strong>\t<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p><strong>California Representative Kevin McCarthy speaks on the House \u2064floor for the final \u2064time \u200bahead of his retirement.<\/strong><\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p><strong>Congress \u200cpasses \u2062the annual \u200bNational Defense Authorization Act approving a record $886 billion dollars in military spending.<\/strong><\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p><strong>Republicans\u2063 pass the\u200d NDAA with surveillance provisions intact\u2063 while Jill Biden delivers a White House Nutcracker.<\/strong><\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p><strong>The students and\u200b faculty of\u200c the University of Nevada Las Vegas hold a \u200dvigil for the people who died in the\u200c shooting earlier this month.<\/strong><\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p><strong>The SEC denied a petition by the country\u2019s largest crypto \u200cexchange Coinbase Global asking the agency to create new rules for the digital asset \u2062industry.<\/strong><\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p><strong>OpenAI \u2062CEO Sam Altman \u2064has doubled down on his\u2062 vision for Worldcoin, following reports the company\u200c was seeking $50 \u200cmillion in funding.<\/strong><\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p><strong>Hewlett Packard said on Friday HP Inc\u2019s\u2063 finance chief Marie Myers would\u2063 join the server maker as its\u200c chief financial officer.<\/strong><\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p><strong>Pope Francis has called for\u200b a <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/gms-cruise-boots-key-leaders-amid-robotaxi-incident\/\" title=\"GM's Cruise replaces top executives following a robotaxi incident\">legally binding international\u2063 treaty<\/a> to regulate artificial \u2062intelligence.<\/strong><\/p>\n<\/p><\/div>\n<p> rnrn  <\/p>\n<h2> How does the size\u200c of money market \u200cfund assets relative to the market and historical trends affect the likelihood of all the cash being \u200binvested<\/h2>\n<p><span>  Investors are keeping a close eye on a significant factor that could \u200bpotentially boost market assets -\u2062 a nearly $6 trillion pile of cash\u2062 on \u2063the sidelines. The recent surge in yields has led to an influx of cash into money markets and other short-term instruments as\u2064 investors sought income in safe vehicles \u2063while awaiting the\u2062 outcome of the Federal Reserve&#8217;s battle against \u200binflation. \u2064According to \u200cdata\u200c from the Investment\u2063 Company Institute, total money \u200cmarket fund assets reached a\u2062 record $5.9 trillion on \u200cDecember \u200c6.<\/p>\n<p>However, the Fed&#8217;s unexpected dovish pivot \u2064may change the equation. If borrowing costs fall in 2024, yields will likely drop as well.\u200d This\u2063 could prompt some investors to deploy their cash into stocks and other risky investments, while others may choose \u200bto lock in yields \u2063by investing in longer-term bonds.<\/p>\n<p>Historical data suggests that cash \u2063has returned an \u2064average of 4.5% in the year following the \u200clast rate hike \u2063by the Fed, while US equities have seen considerable gains. This has led \u2064many investors with a significant level \u200dof cash to realize that they\u200d need to do something \u200dwith it. Charles Lemonides, a portfolio manager of hedge fund ValueWorks LLC, believes that this is just the\u200d beginning \u200dof a cycle that\u200c will continue to feed on itself.<\/p>\n<p>Recent market action indicates that the scramble to recalibrate portfolios may have already started. Benchmark 10-year \u2062Treasury yields\u200b have fallen since the Fed \u2063meeting, reaching their lowest level since late July. The S&#038;P 500\u200d has also seen gains since the Fed&#8217;s decision. Flavio Carpenzano, a\u200c fixed-income investment director at Capital Group, suggests that if investors believe the Fed is done with\u2062 the hiking cycle, it&#8217;s time to deploy their\u200c cash.<\/p>\n<p>However, not all the \u200ccash in money market funds may be available for investment in stocks \u200dand bonds. Some of it is held by institutions that need it for cash purposes.\u2062 Additionally, history shows that a significant portion \u200dof cash in money markets \u2064tends to remain even as rates come down.<\/p>\n<p>Despite the record-high money market fund assets, their size relative to the \u2063S&#038;P 500 \u200cis smaller \u200cthan previous peaks. Currently standing at\u200d about 15.5% of market capitalization, it is in \u2063line with the long-term median and well below the record high of \u200b64% \u2062in 2009 \u200cafter the global \u2062financial crisis.<\/p>\n<p>The appetite\u2062 for risk among investors is\u2064 clearly evident. Traders in the \u200boptions market, for instance, are showing little interest in buying protection against a near-term drop in stocks, even though the \u2063price \u200bof such hedges is historically attractive. \u200dThis leaves the \u2064market vulnerable to a sharp reversal in\u200c the \u200cevent of an unforeseen negative shock.<\/p>\n<p>Despite the\u200d market&#8217;s swift gains in recent weeks, some investors are cautious about the sustainability of the \u2062rally. The\u2063 rapid\u2062 rise in both equities and \u200bstocks has raised concerns about the upside potential for the markets. With\u200c enough money in \u200bthe market to directionally move it higher, investors are becoming concerned \u200dabout the overall market outlook.<\/p>\n<p>In conclusion, the massive amount of cash on the sidelines has the potential to\u200b significantly impact market assets. \u2062While the \u200brecent\u200c dovish pivot by the\u200b Fed may encourage investors to deploy \u200ctheir cash, historical trends and the size of money market fund assets relative to the market suggest that not \u200ball the \u200bcash \u2062will be invested. The market&#8217;s \u200cappetite for\u2063 risk \u2064and concerns about sustainability also play a role in shaping the future direction of investments.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Dec 14, 2023 &#8211; 10:04 PM PST: Investors eye a $6 trillion cash pile on the sidelines, potentially boosting assets, as they question if the market rally can persist<\/p>\n","protected":false},"author":1911,"featured_media":2125995,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[542],"tags":[],"class_list":["post-2125994","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-oann"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2125994","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1911"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=2125994"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2125994\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2125995"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=2125994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=2125994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=2125994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}