Investors started the year pouring money into money market funds. In the first week of the year, $123Bn were invested in cash strategies pushing the overall volume to $6Tn. In principle, this should be a very bullish signal, because this money can be invested in financial assets, but it also means that investors are comfortable with risk adjusted returns of 5ish% vs the double digit returns of a potential volatile equity market, even after a year where indices were close to all time highs. Additionally, it also means that cash is not being deposited into banks, which makes recycling of money into the economy through lending more challenging. This is an important indicator for markets and for the economy.
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