Sunday, July 28, 2013

Mutual Fund Cash Levels Are Increasing

In my earlier post this week I noted investor money market assets as a percentage of all mutual fund assets were at a low level on a historical basis. If investor cash levels are at a low level, then where will the funds come from to propel equities to higher levels?

Interestingly, as the below charts indicate, various types of mutual funds have seen their cash levels increase. Either the cash is coming into mutual funds at a faster pace than fund managers can get it invested or fund managers are making a conscious decision to hold higher levels of cash. At the end of the day fund managers are evaluated on how their fund's performance compares with other funds and the fund's stated benchmark. As a result, it is likely this cash will find its way into investment assets other than cash. Although individual investors may have lower cash levels, it does appear, from a technical perspective, mutual fund cash levels are such that deployment of the cash can push equity prices higher. At a minimum, this cash may act as support for equities in the near term.

From The Blog of HORAN Capital Advisors

From The Blog of HORAN Capital Advisors

The coming week is loaded with potential market moving data.
  • Consumer Confidence on Tuesday
  • GDP reported Tuesday
  • Chicago PMI on Wednesday
  • FOMC interest rate decision on Wednesday. Additionally, the ECB and Bank of England are meeting as well.
  • Jobless claims reported on Thursday
  • ISM Manufacturing PMI on Thursday
  • A lot of earnings reports too. During the week of July 29th,  131 S&P 500 companies are expected to report earnings.

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