Money market mutual fund assets jumped to record levels on the first business day of 2024, according to our Money Fund Intelligence Daily. Crane Data shows total money fund assets rose by $54.9 billion on Tuesday (1/2/24) to an all-time high of $6.355 trillion, breaking previous record highs from mid-December 2023. Assets increased by $32.7 billion in December and $226.4 billion in November, according to MFI Daily. Our MFI Daily shows money market mutual fund assets increasing by $1.11 trillion, or 21.4%, in 2023 to $6.300 trillion, with Taxable Retail MMFs jumping $1.583 trillion (38.4%) to $2.232 trillion and Taxable Inst MMFs rising $448.2 billion (12.8%) to $3.937 trillion. (Tax Exempt MMFs rose by $13.1 billion, or 11.1%, to $131.1 billion.) ICI will release its latest weekly asset totals later Thursday (so watch for more News on this tomorrow), and Crane Data will release its monthly MFI XLS totals on Monday, Jan. 8.
In other news, Bloomberg writes that, "Stock Skeptics Say $6 Trillion Cash Waiting on Sidelines Is a Mirage." They tell us, "One often-made argument in favor of stocks says investors should dive in before roughly $6 trillion of money-market cash gets redeployed into equity assets globally. But buying the theory requires a big leap of faith-- there's significantly less out there to actually fund riskier gambles. So say a pack of stock skeptics who, while not counseling selling out of the market, warn that some of the bull cases going around suffer from some optimistic framings."
The piece explains, "Among them is Deborah Cunningham of Federated Hermes, who estimates that at least 80% of the nearly $1 trillion that's poured into money-market funds since March's financial system woes represents depositors leaving banks, rather than people waiting for entry points in equities and credit. 'It's come through the deposit market, through the retail trade, with the likelihood of that being very sticky,' Cunningham said in a late-December interview on Bloomberg Television."
It says, "That view pours cold water on a bullish case for stocks that's quickly gaining steam -- that the breakneck rally over the past two months will be supercharged by cash coming off the sidelines. The record $5.9 trillion hoard in money-market fund represents dry powder ripe to be redeployed once central banks begin cutting rates, Barclays strategist Emmanuel Cau wrote in a note last week. UBS Asset Management floated a similar thesis in the firm's 2024 outlook, saying that investors exiting cash in favor of risk assets 'could catalyze much stronger performance' than consensus expects once short-term yields decline."
Bloomberg comments, "But even with the S&P 500 hovering near an all-time high, buoyed by growing conviction that the Federal Reserve will lower rates next year, money market funds continue to reliably attract fresh cash -- and the source of that capital matters. Deposits were already starting to leave banks in favor of higher-yielding vehicles in the run-up to March's banking sector turmoil as the Fed's hiking cycle boosted rates on the shortest-dated paper. That dynamic has only intensified in the months since."
They quote Matt Maley of Miller Tabak + Co, "With a lot of that cash coming from banking accounts, it's the money that people will use to meet their regular expenses. In other words, it's not available to move into the stock market.... That doesn't mean there won't be some money rotating into stocks next year, but we also have to remember that those money market account rates are still a lot more competitive than they were in 2020 and 2021."
The article adds, "To that point, Federated Hermes's Cunningham thinks money-market funds will stay competitive even as the Fed embarks on rate cuts to bring monetary policy out of restrictive territory. It's unlikely that the Fed's normalization process will bring interest rates back to zero, but rather to between 3% and 4%, she said. That level will keep retail investors engaged instead of returning their deposits to banks. As such, risk-free cash on the sidelines will prove sticky."
Finally, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of December 29) includes Holdings information from 74 money funds (up 5 from two weeks ago), or $3.071 trillion (up from $3.052 trillion) of the $6.300 trillion in total money fund assets (or 48.7%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here.)
Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.328 trillion (up from $1.287 trillion two weeks ago), or 43.2%; Treasuries totaling $1.147 billion (down from $1.242 trillion two weeks ago), or 37.3%, and Government Agency securities totaling $290.1 billion (up from $266.4 billion), or 9.4%. Commercial Paper (CP) totaled $109.4 billion (up from two weeks ago at $91.2 billion), or 3.6%. Certificates of Deposit (CDs) totaled $93.4 billion (up from $74.6 billion two weeks ago), or 3.0%. The Other category accounted for $63.7 billion or 2.1%, while VRDNs accounted for $39.7 billion, or 1.3%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.147 trillion (37.3% of total holdings), the Federal Reserve Bank of New York with $342.2 billion (11.1%), Fixed Income Clearing Corp with $272.2B (8.9%), Federal Home Loan Bank with $215.3B (7.0%), RBC with $93.6B (3.0%), Citi with $71.6B (2.3%), Federal Farm Credit Bank with $64.4B (2.1%), Goldman Sachs with $60.5B (2.0%), JP Morgan with $57.3B (1.9%) and BNP Paribas with $53.3B (1.7%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($267.8B), Goldman Sachs FS Govt ($231.3B), Fidelity Inv MM: Govt Port ($189.6B), JPMorgan 100% US Treas MMkt ($185.0B), Federated Hermes Govt ObI ($151.3B), Morgan Stanley Inst Liq Govt ($143.6B), State Street Inst US Govt ($132.0B), Allspring Govt MM ($125.7B), Fidelity Inv MM: MM Port ($119.5B) and Dreyfus Govt Cash Mgmt ($111.4B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
