Analyst: Ample "dry powder" in the market, but an interest rate cut may be needed to trigger entry; S&P 500 and money market fund assets are rising in tandem

According to Odaily, Bloomberg Senior ETF Analyst Eric Balchunas stated that the current S&P 500 index is at a historic high, and money market fund (MMF) assets have also reached a new record. This structure, in which both the stock market and cash holdings are at high levels, forms a stark contrast—but for bulls, it means there is still plenty of "dry powder" that has yet to enter the market. A significant return of funds to the stock market may only occur once interest rates fall below 3%, as in the current 4% yield environment, investors are more inclined to hold money market funds with stable net asset values and no downside risk rather than bond ETFs.

Balchunas believes that the sharp bond market sell-off in 2022 (for example, AGG fell about 13%) weakened investors' trust in traditional bonds, leading money market funds to partially replace traditional bond allocations. In addition, US macroeconomic uncertainty—including policy factors related to Trump—has further heightened caution among investors.