Record Highs in Money Market Funds
Investors have been pouring money into money market funds, reaching a record $6.47 trillion in deposits. This surge is driven by the Federal Reserve’s recent interest rate hikes, which have made these funds more attractive for earning returns on cash.
JPMorgan Warns of an End to the Mania
However, the party might be coming to an end. JPMorgan Chase analysts believe that as the Fed starts cutting interest rates, the money market frenzy will eventually slow down.
Slow Exit Expected
While a sudden exodus isn’t expected immediately, JPMorgan predicts it will take a few months for money to start leaving these funds. They are watching the yield curve between short-term and longer-term Treasury bonds, which is still inverted, as a key indicator of when the outflow will begin.
Retail Investors Leading the Charge
The recent influx of money into money market funds has been fueled by both retail and institutional investors. Retail investors accounted for a whopping $8 billion in inflows last week, while institutional investors contributed $3.19 billion.
Disclaimer: This information is for general knowledge and does not constitute investment advice. Always do your own research before making any investment decisions.
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