Wall Street Increases Positions in Money Market Funds with Inflows of $166.4 Billion

Investors on Wall Street increased their cash positions at the fastest pace since the pandemic. Michael Hartnett, strategist at Bank of America, warned that a significant reduction in these holdings will depend on a decisive shift in U.S. monetary policy. Money market funds recorded inflows of $166.4 billion in the week ending October 7, the largest weekly flow since April 2020, according to Bloomberg data. This magnitude reflects investors' preference for liquid and lower-risk instruments in a context of high interest rates and uncertainty about inflation. Hartnett stated that money will remain on the sidelines until the Federal Reserve implements a sustained cycle of monetary easing. Debt market expectations anticipate three new interest rate hikes in the U.S. by the end of July, with the next move expected in December. The accumulation of liquidity also occurs in a context of increased competition for stocks, as bonds and cash instruments offer attractive yields. In the last week analyzed, bond funds attracted $33.8 billion, while equity funds received $12.4 billion, highlighting the preference for fixed income over equity assets.

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