Chart Of The Week – Quarantined Cash

Stocks have been on fire from the March 23 low, climbing 30%+ and seemingly defying most fundamental logic. There have been minor pullbacks along the way, but for the most part, it has been among the sharpest snapbacks the market has ever experienced. For perspective back in 2008-2009, it took about 7 months for the VIX to finally drop below 30% from its late 2008 peak above 80%. This time around it took 7 weeks.

How do investors feel about the roller coast ride? Maybe not so great. Sentiment can be tough to judge sometimes. At Topdown Charts, we take weekly surveys from the Twittersphere to get our own gauge (and checking out the surveys of many others like Sentix, AAII, and so-on). We can go beyond that though by reviewing where people are actually putting their money and by reviewing longer-term sentiment data trends.

We chart vast amounts of economic data to help form our global macro and asset class views. Where people are putting their cash is one of them. Below are charts from the latest weekly report of money market holdings in dollars and the AAII sentiment survey with ICI Implied Allocations.

We talked about cash allocations back in January 2019 in one of the year’s 10 charts to watch. Data showed that investor cash positioning was near record/cycle lows going into 2018, and nearly the same aggressive positioning was seen in early 2020.

(Click on image to enlarge)

First up – money market holdings. The retail and institutional money market figures are a bit deceiving in that you may see them and think, “wow – all-time highs! Bearish!”, but hold your horses. Of course, there are more assets, in general, today versus 2008, so there is a bit of ‘denominator blindness’ going on.

Nevertheless, cash apparently is king right now. Unfortunately, our king is also losing out to inflation with a Fed Funds target rate near zero and core CPI & PCE deflator data running around 1.5%-2.0%. But increased cash holdings also makes intuitive sense since job security is down and volatility is up. 

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Robert Ries 2 months ago Member's comment

Thanks for share

Clifford Hurt 3 months ago Member's comment

Thanks for share