Retail Money Market Funds
APPLICABLE TIME FRAME(S):
LONG
UPDATE SCHEDULE:
Weekly
REPORTING DELAYS:
None
EXPLANATION:
The ICI collects data on money market holdings of institutional and retail investors. "Retail" is a term used for individual (or "mom and pop") investors.
Money market funds are highly liquid instruments that are seen as a safe haven in terms of economic or financial turmoil. While they typically pay low rates of interest, they are among the safest investment vehicles available.
We prefer to view the data in terms of the market capitalization of the S&P 500, which is shown in the lower panel of the chart.
GUIDELINES:
Since money market funds are a form of cash, we often see levels rise as markets fall, but the inverse isn't always true. However, when we express the level of funds as a percentage of the market cap of an index like the S&P, it takes on a more defined range as an indicator.
Very high levels of money market assets (10% or more of the S&P's market cap) have been associated with times of financial panic, and have been good buying opportunities. Conversely, very low levels of money market assets (5% or below) have been times of relative calm in the market. When fund assets reach one of these extremes - then move out of that extreme as investors change their behavior, it has coincided with decent buy and sell signals, respectively.
ADDITIONAL RESOURCES:
Investment Company Institute (ICI)
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