Investors are crowding into cash at a clip not seen since the early-pandemic rush, according to Bank of America's Michael Hartnett. He flagged $166.4 billion flowing into money-market funds in the week through Oct. 7, the largest since April 2020. His read is simple: "No rate cuts, no cash cuts." In other words, that money is likely to stay put until the Federal Reserve moves beyond tweaks and into a sustained easing phase. He also notes that major drawdowns in cash balances typically show up during periods of substantial monetary easing.
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With interest rates rising across the globe to fight inflation, bonds and cash are offering yields that make them real contenders for investor dollars. In the latest week, bond funds took in $33.8 billion while equities pulled $12.4 billion, Bank of America data show. That shift underlines the challenge for stocks as safer assets pay more to wait.
Bond markets are factoring in three more US rate increases to be finished by the end of July, and they indicate the next is expected at the December meeting. That setup helps explain why Hartnett thinks it will take unmistakable policy easing to draw cash back into risk assets. He also views the US midterms as the likeliest catalyst for a meaningful stock move heading into 2027, and he stays cautious until then, given the ongoing phase of central bank rate adjustments and the currently restrictive financial backdrop. For your money, it boils down to a clear trade-off: yields that reward patience today versus the potential payoff from a bigger equity swing if policy and politics line up.
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