Analyst: Market has ample "dry powder," but entry may require rate cuts as trigger; S&P 500 and money market fund assets rise in tandem

Odaily Planet Daily News: Eric Balchunas, Senior ETF Analyst at Bloomberg, stated that the S&P 500 is currently at historical highs, while money market fund (MMF) assets have also hit record levels. This contrast of "both stocks and cash at highs" is stark, but for bulls, it means there is still plenty of "dry powder" that has yet to enter the market. A significant return of funds to the stock market may only occur when interest rates fall below 3%, as in the current 4% yield environment, investors prefer holding stable net asset value money market funds with no drawdown risk over bond ETFs.

Balchunas believes that the substantial drawdown in the bond market in 2022 (e.g., AGG fell by about 13%) eroded investor confidence in traditional bonds, leading money market funds to partially replace traditional bond allocations. Additionally, macroeconomic uncertainties in the U.S. (including factors related to Trump's policies) have further exacerbated capital's wait-and-see sentiment.