Written by Nathan White, Chief Investment Officer
This is an updated version of a chart we posted a few months ago. As of the end of February and before the March rally, Money Market Fund and Cash assets represented 47% of the total market value! Cash is the fuel that feeds a rally, and with cash yielding next to nothing there will be pressure put on those who hold it to put it to work. As confidence returns, the cash will flow back into the market sending it higher. Look at the rallies that come after cash levels have peaked.
Written by Nathan White, CFA
This chart measures the the amount of selling that has taken place during this historic market downturn.
Focus on the bottom line of the graph, which measures money market assets as a percentage of total market value. At the end of October it was 32.8%, which is higher than 1982 and 2002!
The November figures are not available yet, and will definitely put the figure even higher.
The point of posting this chart is to offer some historical perspective of what happened after these peaks in cash levels. I would liken the large amount of money market assets as a tremendous store of potential energy just waiting to be released at some point into kinetic energy. Now, I don’t know at what point all this “potential energy” will be released onto the market and there is nothing to say that it can’t keep growing larger.
According to this chart, where would you want to be positioned right now? Remember to think long-term.