Bank of America: $166.4 billion inflow into money market funds in a week, cash unlikely to leave before rate cuts

As of the week ending October 7, money market funds attracted $166.4 billion in inflows, the largest weekly amount since April 2020. Bank of America strategist Michael Hartnett stated that if the Federal Reserve does not initiate sustained and significant monetary easing, this influx of funds is unlikely to leave cash-like assets on a large scale in the short term. He pointed out that the current logic of funds is "no rate cuts, no reduction in cash." Hartnett believes that high cash levels do not necessarily imply a significant potential buying power in the stock market in the future, as cash itself can provide relatively attractive yields. The market expects that the next rate hike by the Federal Reserve is more likely to occur in December rather than at the end of October, and the interest rate market is also factoring in the possibility of continued tightening in the coming months. In this environment, cash is no longer an "waiting asset" with almost no yield. Money market funds and short-term bonds offer higher interest rates, and their price volatility is significantly lower than that of stocks and long-term bonds, thus investors lack the motivation to take on more risk.

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