Investor cash on the sidelines could serve as a source of funds for additional stock purchases and a continued move higher in the market averages. As the below chart shows, cash levels remain higher than the 27% reached during the 2001-2002 recession and far above the 16% historical average.
|From Disciplined Approach to Investing|
If one includes ultra short and short term bond fund investments, potential liquidity that could find its way into stocks is significant. In short, investors do not believe this rally is sustainable and that is music to a contrarian's ears.
Still High Cash Levels May Provide Further Support For Stocks (PDF)
Fidelity's Market Analysis, Research and Education
October 22, 2009