With major markets on the move across the globe, a critical warning indicator just plunged to the lowest level in history.
Fund Managers See No Need For Cash
From Jason Goepfert at SentimenTrader: There have been increasing reports of large investors raising cash, usually citing over-extended valuations or uncertainty about the new administration in Washington. One of the several groups not raising cash is mutual fund managers…
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According to the latest monthly release, funds decreased the amount of cash on hand yet again, falling to 3.0% of total assets, another all-time record low.
Mutual Fund Cash Levels Plunge To Lowest Level In History!
Because short-term interest rates have been rising, that increases the incentive to hold cash. The fact that rates are rising but cash balances are falling means that the “cash deficit” at mutual funds is now the most extreme since 2007.
In the past 20 years, the deficit has gotten this large three times, all eventually preceding market trouble, but the “eventually” was the kicker – it took several years leading up to the 2008 bear market. We’d consider these low cash levels to be only a minor negative at this point, but it will become more of one if it continues if/when short-term interest rates rise significantly.
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