Currently, investors are crowding the market finding comfort in the safety of money market funds. This is the most action the market funds have seen since the 2008 financial crisis collapse from Lehman Brothers. In the past six months, the money industry has risen more than $322 billion. Numbers like these have not been seen since the second half of 2008.
Assets are nearly up to $3.5 trillion according to Merrill Lynch and FactSet. On a good note, these changes are proceeding an opportunity that most investors could not pass up in the stock market. At the beginning of 2009, the bull market was kicked off by Wall Street, and it gained the record for longevity.
According to the chief marketing strategist for Prudential Financial, Quincy Krosby, many people would be contradicting themselves if they were saying this high flow of money market funds is a positive thing. If the market does study itself and a trade war comes about, all of this money is going to be moved back into the equity market. From the standpoint of a contrarian, this move would be very helpful.
Since September 2009, money market assets are at their highest level and continuing at a significant pace that makes investors hopeful. Money market funds have been receiving inflows each month this year except for April. The rise of the stock market was due to its wrestling with various issues.
The primary issue facing the stock market is the trade dispute between the United States and China that is continuing to linger and is pushing the U.S. towards a possible recession. Because of the constant news flooding the headlines of all newspapers, investors are choosing to keep their cash safe in money market funds or storing their cash under mattresses until the threats pass.
According to Krosby, the rough headlines concerning politics, recession talk and trade concerns are becoming too much for many investors to handle. For the past year, stocks have been on a roller coaster ride. They seem to tumble at any small sign there may be a break in the talks between the United States and China to signify deals coming to a close.
On Friday, the DJIA went up more than 400 points after positive sentiments came out of Washington that the trade talks this week were fruitful. If this good news can continue, we will not have to worry about a recession anytime soon.
Dil Bole Oberoi
