$6.1T

Money funds are raking in record amounts of cash

4/9/24 2:11PM

The stock market might be desperate for rate cuts, but for those with cash to stash away, high rates are just fine.

High short-term interest rates — closely tied to the short-term rates the Fed uses to implement monetary policy — have greatly increased the incentives for keeping cash on hand over the last couple years.

In early January 2022, you basically received no interest if you put your money in safe money market mutual funds. Now you get more than 5%.

You don’t have to be an economic theorist to see why that’s resulted in money rushing into money market mutual funds. Those dollars chasing higher yields have added to money market fund coffers that were already swollen after the Covid-related stock market sell-off and the string of bank runs set off by the collapse of Silicon Valley Bank in 2023.

According to the latest figures from the Investment Company Institute — a trade and lobbying group for mutual funds — some $6.11 trillion now sits in these funds, up from roughly $4.50 trillion in early 2022.

To be clear, the parallel sagas of the stock investors and money market savers, are two sides of the same coin.

Part of the reason that rate cuts are thought to boost stocks is because those cuts lower the incentives for socking money away in vehicles like super-safe money market mutual funds that invest in things like short-term US government Treasury bills.

Such securities are the closest thing you can get to a risk-free investment. Cutting rates lowers the return on no-risk bets and forces some cash back into the much riskier stock market — or at least that’s the theory.

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“The signal to the car companies around the world is, look, you have final assembly in the US, we’re going to reward you,” Ohio Republican Senator Bernie Moreno told Reuters. “For Ford, for Toyota, for Honda, for Tesla, for GM, those are the almost in order the top five domestic content vehicle producers — they’ll be immune to tariffs.”

The senator told Reuters that President Trump could potentially extend the higher levels of tariff offsets announced by the Commerce Department in June.

According to the White House, Moreno’s comments should be considered “speculative,” but shares of vehicle makers including Ford, GM, Toyota, Honda, and Stellantis all rose after the report came out.

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The company said any conclusions that the product was seriously flawed, drawn from reports in Reuters and an online publication known as Breaking Defense, were “out of date and inaccurate.”

Separately, Army officials also told Breaking Defense that deficiencies with the battlefield communication product were “mitigated immediately.”

Going into the last hour of trading, Palantir shares were on track for their worst day since August in the wake of the reports.

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The company’s weight-loss pill recently reported encouraging results in a late-stage trial.

Novo currently has partnerships with Hims competitors like Ro and Weight Watchers. Hims had a deal with Novo earlier this year, which blew up epically in less than two months.

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The firm pointed to Shopify’s new partnership with OpenAI’s ChatGPT as a key growth driver, saying it opens up a fresh sales channel that, for now, only Shopify and Etsy merchants can tap into.

Analysts also highlighted that unlike the Magnificent 7 tech names, Shopify can fold AI revenue into its model without heavy capital spending, meaning those contributions could offer a quick boost to free cash flow.

On that note, the firm also bumped its 2025 to 2027 earnings estimates by about 6% to 8%. Shopify shares have already more than doubled over the past year and are up roughly 50% year to date.