The Federal Reserve has roiled markets by implementing massive rate rises in a bid to control the sharpest inflation in 40 years In 2022. However, rising rates translate into better rates for money market funds. In September, fund managers upped their average cash reserves to 6.1%, the highest level in more than two decades. Since the epidemic began in 2020, money market funds have yielded nearly nothing.
The S&P 500 has been down 4.8% in the last week and is down 18.7% this year. Inflation, which stood at 8.3% year on year last month, has reduced the attraction of cash to investors. Extreme cash levels are frequently regarded as a so-called contrarian indication that portends well for markets.
Cumberland Advisors’ chief investment officer, David Kotok, stated that his U.S. equities portfolio is presently 48% cash. Money market fund assets have been elevated since the epidemic began, reaching $4.44 trillion last month, not far from their record of $4.67 trillion in May 2020.