My Favorite Chart -- US MMF Monitor Posted -- December 19, 2023

Locator: 46350MMF.

More than $6 trillion "on the sidelines." Some talking heads on CNBC and some tweeters opine that a lot of that money could flow back into the equity market in 2024 if the Fed cuts rates. Not gonna happen. Most of that money was moved from checking and savings accounts at banks. Huge problem for regional banks. Some of that MMF money will flow back into the equity market but most of it will stay in MMFs. Compared to MMFs, equities are riskier and even at 2%, MMF compare favorably with equities in many cases.

My favorite chart, link here.

From Morningstar:

Strong November Flows Don’t Change the Larger Trends for 2023: the vast majority of inflows accrued to just two category groups.

U.S. mutual funds and exchange-traded funds collected $33 billion in November 2023, just their fifth month of inflows in 2023. The vast majority of inflows accrued to just two category groups: U.S. equity and taxable bond. Five of the 10 groups suffered outflows in November.

Status Quo Largely Persists for U.S. Equity Funds:

Nearly $22 billion entered U.S. equity funds in November, their largest inflow since they gathered $35 billion in May 2022. As usual, passive large-blend funds did the heavy lifting. They took in about $29 billion in November and have collected a whopping $140 billion for the year to date. Large-growth funds collected $1.6 billion in November, their first monthly inflow since June 2022. [You don't often hear analysts using the word "whopping."]

High-Yield and Corporate-Bond Funds Turn a Corner:

The taxable-bond cohort collected $21 billion in November behind breakout flows into some of its riskier pockets. High-yield bond funds absorbed nearly $13 billion in their best month since May 2020, and corporate-bond funds reeled in nearly $5 billion. After favoring safer bond funds for most of 2023, investors in November pivoted into categories that court more credit risk.