If you like getting close to 5% on your money markets, then check out Fidelity’s Treasury Money Market. Remember, even if the Fed cuts rates, it may take a while, and you might be surprised at how it unfolds. Farah Elbahrawy reports for Bloomberg:
Investors are still flocking to cash funds, and Bank of America Corp. strategists say history suggests redemptions won’t begin until a year after the Federal Reserve starts cutting interest rates.
Money-market fund flows rose in anticipation of the first cut over the past five rate reduction cycles, before inflows slowed meaningfully when the central bank actually started cutting rates, a team led by Michael Hartnett wrote in a note. Outflows began 12 months later, they said.
Investors are still in the phase of pouring into cash funds, which received $82 billion in the week through Wednesday, according to the BofA strategists who cited EPFR Global data. Money-market funds are annualizing $1.2 trillion of inflows, the second highest ever.
Cash funds have been seeing massive inflows for several months, far above other asset classes like equities, showing investors likely missed out on the S&P 500’s 34% rally since the start of 2023.
Action Line: Be smart with your lazy cash. Get it off the couch and put it to work for you. When you want to talk about how to do it, I’m here. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.
