Amid signals of lower interest rates from the Federal Reserve, investors are eyeing a substantial cash reserve of nearly $6 trillion that could fuel further gains across U.S. stock markets in 2024. Rising yields have attracted cash into money markets, with total money market fund assets reaching a record $5.9 trillion.
The Fed’s unexpected dovish pivot is altering market dynamics, potentially prompting investors to deploy cash into stocks and other riskier assets as borrowing costs are anticipated to decrease. Historically, cash has generated an average return of 4.5% in the year following the last Fed rate hike, while U.S. equities and investment-grade debt experienced significant gains. This liquidity influx could amplify market momentum, but concerns persist about the sustainability of recent swift gains.