Americans holding $3.5 trillion in cash are giving money managers increasing confidence that the stock market rally under President Barack Obama will continue through the end of the year.
Even after reducing money-market accounts by 11 percent this year, investors have cash equal to 73 per cent of Standard & Poor's 500 Index companies' net assets, according to data compiled by the Investment Company Institute and Bloomberg.
At the peak of the bull market in 2007, the measure of buying power was 62 per cent. The S&P 500 climbed 54 per cent since March 9th as the US government and Federal Reserve lent, spent or guaranteed $11.6 trillion, and the central bank held interest rates near zero to fight the longest recession in seven decades.
No new president since Franklin Roosevelt has seen a bigger rally than Mr Obama. The S&P 500 climbed 30 per cent since he was sworn in as economists lifted estimates for third-quarter growth almost sixfold to 2.9 per cent. Forecasts for next year's gross domestic product rose to 2.4 per cent from an average estimate of 2.1 per cent on Inauguration Day, according to Bloomberg data.
Investors placed $1.45 trillion in US money-market funds in 2007 and 2008 during the worst financial crisis since the Great Depression, based on data from Washington-based ICI.
The amount has dropped $439.5 billion since reaching a record $3.92 trillion in the week ended January 14th. A broader measure of reserves that includes cash, bank deposits and money-market funds has climbed to $9.55 trillion this month, based on data compiled by the Fed.
That's enough to buy all of the companies in the S&P 500, which have a combined market value of $9.22 trillion, Bloomberg data show. Since 1999, so-called money at zero maturity has on average accounted for 62 per cent of the stock index's worth.
Bloomberg