No Rate Cuts, No Stock Buying? Bank of America Warns: Over $160 Billion Flowed into Money Market Funds in a Single Week

Odaily Planet Daily reports that Bank of America strategist Michael Hartnett stated that for the week ending October 7, money market funds attracted $166.4 billion in inflows, marking the largest single-week inflow since April 2020. He believes that as long as the Federal Reserve does not initiate sustained and significant monetary easing, this influx of funds will find it difficult to leave cash-like assets in the short term. Hartnett summarized the current capital logic in one sentence: 'No rate cuts, no reduction in cash.' Contrary to the common assumption that 'excess cash will eventually flow into the stock market,' he argues that the current high levels of cash do not necessarily indicate a massive potential buying force for equities in the future, as cash itself already offers relatively attractive yields. The market now expects the Federal Reserve's next rate hike to be more likely in December rather than at the late October meeting. The interest rate market has also priced in the possibility of continued tightening in the coming months. In this environment, cash is no longer the low-yield 'waiting asset' it once was. Money market funds and short-term bonds can provide higher interest rates while exhibiting significantly lower price volatility compared to stocks and long-term bonds, leaving investors with little incentive to take on additional risk.