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Amid Cooling Rate-Cut Euphoria, Investors Retreat To US Money Market Funds Out Of Caution

Before important payroll data, U.S. investors shifted from holdings in equity funds to money market funds out of caution as a stock market boom subsided and they anticipated additional evidence to back forecasts of significant rate reduction from the Federal Reserve.

US Labor Market Going Strong

Their largest weekly net buying since November 29 saw them buy over $56.92 billion worth of U.S. money market funds while selling roughly $5.54 billion worth of equity funds, according to LSEG data.

Money Market

Source- CNN

The US labor market is still strong, according to Thursday’s unemployment report, which dashed expectations of significant rate reduction from the Federal Reserve this year. Expectations regarding the timing and speed of rate decreases would be further influenced by the announcement of monthly U.S. payroll numbers later in the day.

The S&P 500 (.SPX) has dropped 1.7% in the first week of 2024 after rising for nine straight weeks, raising doubts about whether predictions for sharp rate cuts are realistic.

$687 million, $1.37 billion, and $652 million were withdrew by investors from large-, mid-, and multi-cap funds in the United States, respectively. For a seventh consecutive week, net buying of small-cap funds attracted $1.32 billion, indicating continued demand.

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