Q: Dear Peter et al:
Everyone including yourselves talk about 7+ T USD on the sidelines when a question about market correction is asked. This money will step in and protect the markets from a crash. That seems to be the
thesis here.
But the huge cash reserves of big companies, (BRK for example) pension funds and various PE firms
(listed and unlisted) have ALWAYS
been a feature in the market, no?.Even during the bull or bear
market this Cash on the sidelines has been a constant, right?
So, the question is what is the range of cash on the sidelines? Can this cash on the sidelines act as a " metric" to signal Bull or Bear market?
(Just like your thesis on VIX. 40+ means buying time).
In simple terms what should be the "Normal" cash on the sidelines?!
Everyone including yourselves talk about 7+ T USD on the sidelines when a question about market correction is asked. This money will step in and protect the markets from a crash. That seems to be the
thesis here.
But the huge cash reserves of big companies, (BRK for example) pension funds and various PE firms
(listed and unlisted) have ALWAYS
been a feature in the market, no?.Even during the bull or bear
market this Cash on the sidelines has been a constant, right?
So, the question is what is the range of cash on the sidelines? Can this cash on the sidelines act as a " metric" to signal Bull or Bear market?
(Just like your thesis on VIX. 40+ means buying time).
In simple terms what should be the "Normal" cash on the sidelines?!
5i Research Answer:
There is $7.2T in money market funds right now, up about 16% from last year. Non-financial companies have about $1.14T, down a bit from 2023 levels. Corporate cash does not vary as much as money market cash. Typically, investors shift to higher MM cash when rates are high, and vice versa. The thesis is that as rates come down, MM cash will be less attractive and this, in theory, could support equity markets. There is not really a 'normal' number...it moves much more slowly over time but once a trend is in place it tends to continue for a while.