Analyst: Market "dry powder" is abundant, but market entry may require a rate cut trigger; S&P 500 and money market fund assets rise in tandem

Odaily Planet Daily News Bloomberg Senior ETF Analyst Eric Balchunas stated that the current S&P 500 index is at an all-time high, while money market fund (MMF) assets have also hit a new high. This structure of "stocks and cash both at high levels" presents a sharp contrast, but for bulls, it means there is still a large amount of "dry powder" that has yet to enter the market. A significant return of funds to the stock market may require interest rates to drop below 3%, because in the current 4% yield environment, investors prefer to hold money market funds with stable net asset value and no drawdown risk over bond ETFs.

Balchunas believes that the substantial drawdown in the bond market in 2022 (such as AGG falling about 13%) has weakened investor trust in traditional bonds, causing money market funds to partially replace traditional bond allocations. Additionally, macro uncertainties in the US (including factors related to Trump's policies) have also intensified a wait-and-see sentiment among funds.