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Bank of America warns that $166.4 billion has flowed into money market funds in a single week, and cash is unlikely to return to the stock market ahead of interest rate cuts.

2026.10.09 19:58:09

Bank of America strategist Michael Hartnett said that in the week ending Oct. 7, money market funds drew $166.4 billion in inflows, marking the largest weekly inflow since April 2020. Over the same period, bond funds and stock funds saw inflows of $33.8 billion and $12.4 billion respectively, indicating investors are significantly increasing their allocations to cash-like assets. Hartnett noted that the current high-interest rate environment makes cash itself highly attractive in terms of returns, so the massive size of money market funds can no longer be simply viewed as "dry powder" for the stock market waiting to enter. He summarized the current capital flow logic as "No rate cuts, no reduction in cash", arguing that only when the Federal Reserve launches sustained and significant monetary easing is it more likely to drive large-scale capital outflows from cash-like assets. Recently, U.S. 10-year and 30-year Treasury yields have continued to climb, and the Fed raised the federal funds rate target range to 3.75%-4.00% in September. Against the backdrop of sustained high cash yields and recovering bond appeal, the stock market is facing dual competition from cash and fixed-income assets. Hartnett also cited the Nov. 3 U.S. midterm elections as a key event that could trigger major stock market volatility this year, and warned investors to watch for risks including deteriorating breadth in the U.S. stock market and rising long-term Treasury yields.

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