Cash on the Sidelines Just Hit a Record High

Money-market funds are in the headlines for the first time since the 2008 financial crisis...

These funds hold boring and safe short-term debt. They're designed to always trade for a dollar, and they spin off any profits as a dividend.

In 2008, folks were worried that money-market funds could "break the buck," or fall below a dollar. That was possible because of all the toxic debt in our financial system at the time.

Today, these funds are getting attention for a different reason...

Assets in money-market funds have ballooned to an all-time high. Folks are worried about the stability of the banking system... So they're buying these funds, which offer an easy, low-risk way to earn 4%-plus.

Digging deeper, a specific subset of money-market funds has grown at a staggering pace. But that cash won't stay on the sidelines forever. It's only a matter of time until it moves into stocks, propelling the market higher.

Let me explain...

Total money-market assets are now above $5 trillion. And they've even popped above their pandemic high in 2020. That's crazy on its own. But a specific area of this market has moved in an even bigger way.

I'm talking about retail money-market assets. These are money-market funds held by regular mom-and-pop investors.

This measure has jumped more than $300 billion over the past year. And it has soared to an all-time high in the process. Take a look...

Retail money-market assets have a history of peaking during the worst periods for stocks. (The gray bars on the chart indicate recessions.) That's because scared investors tend to pull money out of the market at the worst possible times.

The fact is, an all-time high in these assets is a great sign for stocks going forward. And how quickly we got there is even crazier.

You can see it in the chart below. It shows the year-over-year change for retail money-market assets. And it has increased at one of the fastest levels on record. Take a look...

Retail money-market assets jumped 30.4% over the past year. That's higher than what we saw during the pandemic... higher than the 2008 financial crisis... and much higher than the dot-com bust.

Heck, only the increase that happened between the 1987 crash and the 1990s recession was larger. So not only is today's measure at a high... but it's rising at near-record speed.

Retail money-market assets are one of many ways to see fear from mom-and-pop investors. And if you can buy when others are fearful, you'll do darn well as an investor.

This is no guarantee that stocks can't fall further. But it means that when the bull market emerges, it'll be a powerful one. Trillions of dollars are sitting in money-market funds right now. And retail money-market assets are at a record high.

Once investors get over their fear, that money will funnel back into the market. That has happened after every similar setup in the past. And it'll happen again.

When it does, a trillion dollars or more could move into stocks. That will be a massive amount of fuel to light a fire under the new bull market. So make sure you're positioned now... before this trend reverses and stocks soar.

Good investing,

Brett Eversole

Further Reading

"Roughly two-thirds of investors expect cash to help portfolio returns this year," Brett writes. That's because of the tough market we saw in 2022. But this belief is irrational – and it's exactly the kind of bearish sentiment that we see near market bottoms... Read more here.

Last month's banking crisis caused a panic in the markets. But history shows that fear could give way to opportunity – and specifically, stocks could jump more than 20% over the next year... Learn more here.

Market Notes



Visa (V)... payment-processing giant
Thomson Reuters (TRI)... media, finance, and more
Stryker (SYK)... medical devices
Clorox (CLX)... cleaning supplies
Coty (COTY)... cosmetics
Crocs (CROX)... footwear
General Mills (GIS)... packaged foods
Hershey (HSY)... "Global Elite" chocolatier
McDonald's (MCD)... burgers and fries
Chipotle Mexican Grill (CMG)... tacos and burritos
Restaurant Brands International (QSR)... fast-food brands
Yum! Brands (YUM)... fast-food brands
Las Vegas Sands (LVS)... casinos and resorts
D.R. Horton (DHI)... homebuilder
Lennar (LEN)... homebuilder
General Electric (GE)... manufacturer
AutoZone (AZO)... auto parts
Southern Copper (SCCO)... copper


Infosys (INFY)... IT consulting
F5 (FFIV)... web-app security
Rivian Automotive (RIVN)... electric vehicles
DISH Network (DISH)... satellite TV