{"id":13562,"date":"2024-11-27T20:10:17","date_gmt":"2024-11-27T20:10:17","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13562"},"modified":"2024-11-27T20:10:17","modified_gmt":"2024-11-27T20:10:17","slug":"money-market-investments-rise-even-as-rates-go-down","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/money-market-investments-rise-even-as-rates-go-down\/","title":{"rendered":"Money Market Investments Rise, Even As Rates Go Down"},"content":{"rendered":"\n<p><em>Daniel T. from Tigard, OR asks: <\/em>Hi Mitch, I was under the impression that as the Fed lowered interest rates, money would shift out of money market funds. The hope was that the money would flow into stocks, lifting prices in the process. The stock market is doing great, but I\u2019ve noticed that even more money has flowed into money market funds. Can you square this circle for me? Thanks!<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thank you for sending in your question, Daniel. You bring up an interesting point\u2014as the Fed cuts rates and as the stock market continues to rally, one might have expected logically that money would \u201ccome off the sidelines\u201d and flow into risk assets. But we\u2019re not seeing that in money market funds.<\/p>\n\n\n\n<p>As seen on the chart below, cash continues to pour into money market funds at a steady clip:<\/p>\n\n\n\n<p><strong><em>Money Market Funds, Level<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"186\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/11\/pic1resized.png\" alt=\"\" class=\"wp-image-13564\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/11\/pic1resized.png 550w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2024\/11\/pic1resized-300x101.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Source: Federal Reserve Bank of St. Louis<sup>1<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_11_28_2024&amp;content=spending_in_retirement\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_11_28_2024&amp;content=spending_in_retirement\">Guarantee Your Retirement Lasts<\/a><\/u><\/strong><\/p>\n\n\n\n<p>Retirement is your time to enjoy life\u2019s best moments\u2014so I recommend ensuring your finances are ready.<\/p>\n\n\n\n<p>There are proven strategies to help your retirement savings go the distance. Download our free guide, <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_11_28_2024&amp;content=spending_in_retirement\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_11_28_2024&amp;content=spending_in_retirement\">4 Strategies for Spending Money in Retirement<sup>2<\/sup><\/a><\/u><\/em><\/strong>, and get expert tips on managing your retirement wisely. Plus, you&#8217;ll gain valuable insights on:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Spending 101: Understanding tax buckets<\/li>\n\n\n\n<li>The 4% rule<\/li>\n\n\n\n<li>Dynamic spending with the 5% rule<\/li>\n\n\n\n<li>And more\u2026<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, simply click on the link below to get your copy today!\u00a0<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_11_28_2024&amp;content=spending_in_retirement\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_11_28_2024&amp;content=spending_in_retirement\">Download Zacks Guide, <em>4 Strategies for Spending Money in Retirement<sup>2<\/sup><\/em><\/a><\/u><\/strong><\/p>\n\n\n\n<p>I think there are a couple of reasons cash keeps moving into money market funds. The first is that money market funds continue to pay a competitive yield relative to other cash alternatives, like high-yield savings accounts. Money market funds buy Treasury bills and other short-dated instruments, and currently pay north of 4.5%. With recent Fed rate cuts, many banks have been quick to reflect those changes in high-yield savings accounts, which pay closer to 4% or even lower. Investors are behaving accordingly.<\/p>\n\n\n\n<p>The second reason we\u2019re not seeing a massive rotation from money market funds into equity markets is that cash does not generally compete with stocks and other risk assets. Cash mostly competes with cash, in my view, which is why money market funds continue to see inflows. Money market funds continue to be where investors can find some of the most attractive, lowest-risk yields.<\/p>\n\n\n\n<p>Consider that money market funds also do not represent the only cash being held by households and businesses. Investable cash exists in other places, so it\u2019s possible for the stock market to continue rising alongside the level of assets in money market funds. It\u2019s not a zero-sum game.<\/p>\n\n\n\n<p>If you&#8217;re an investor looking to make the most of your retirement savings, I recommend downloading our exclusive guide, <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_11_28_2024&amp;content=spending_in_retirement\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-spending-in-retirement-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_spending_in_retirement_zim_11_28_2024&amp;content=spending_in_retirement\">4 Strategies for Spending Money in Retirement<sup>3<\/sup><\/a><\/u><\/em><\/strong>. This guide covers essential strategies and best practices for creating an effective retirement spending plan.<\/p>\n\n\n\n<p>You\u2019ll discover:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Spending 101: Understanding tax buckets<\/li>\n\n\n\n<li>The 4% rule<\/li>\n\n\n\n<li>Dynamic spending with the 5% rule<\/li>\n\n\n\n<li>And more\u2026<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and are ready to learn more, click on the link below to get your copy today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>With the Fed lowering interest rates, one might think that money would be coming out of money market funds\u2014but the opposite is happening.<\/p>\n","protected":false},"author":3,"featured_media":13563,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-13562","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13562","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13562"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13562\/revisions"}],"predecessor-version":[{"id":13565,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13562\/revisions\/13565"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13563"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13562"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13562"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13562"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}