Is cash on the sidelines a bullish sign?

01.29.21

Chart of the Week – Is cash on the sidelines a bullish sign?

Money market fund assets grew by 32% from February 2020 through May 2020. They remain elevated today at $4.3 trillion, well above the five-year average of $3.2 trillion. Many market pundits believe this is a bullish sign for equity markets. Is it?

It may be, but the level needs to be put into context. Over the past 30 years, money market fund assets have a median value of 13.5% of the Wilshire 5000 Index’s value, never going below 9.5%. Today that number is 10.6%. From an asset allocator’s perspective, it’s hard to argue that cash holdings are high.

Money Market Fund Assets as a Percentage of Wilshire 5000 Index

Chart Showing Consumer Spending During the Pandemic

Source: BEA, Bloomberg, Ivy Investments. Dates shown are February 2020 through November 2020. This chart is being provided as a general source of information for education purposes only, and is not intended as a recommendation to purchase, sell or hold any specific security or to engage in any investment strategy.
Wilshire 5000 Index measures performance of all U.S. equity securities with readily available price data.