This is the fuel for the next market surge
“Davidson” submits:
The history of Retail Money Funds vs SP500 reveal this indicator post new highs during market downturns as investors flock to safety and sell equities. That the SP500 has posted record highs with Retail MFs also posting record highs reflects the bi-polar nature of investors as a group. It is also why investors should never be thought of as uniform or prescient of the future no matter how skilled they claim to be. The SP500 posting of record highs comes from a group of Momentum-driven issues that liquidity permits large pools of capital to trade. The many of the rest of the SP500 trade at discounts to prior pricing with some extremely discounted. Taken at face value, new record highs in Retail Money Funds reflect high market pessimism. Likewise, this time around, the capital pooled into the few Momentum names dominating SP500 price movements that large capital pools believe could not lose, recession or no recession. That we see stubborn adherence to those chosen few continue despite it being clear that there is no recession on the immediate horizon indicates the so-called Mag 7 and associated issues remain Momentum favorites.
I had expected to see the many industrials producing good earnings and forward guidance the past 24mos to become market favorites or at least approach past valuation levels, pre-COVID, as they recovered from the lockdowns. However, no sudden turn has occurred as yet, and the extended Retail Money Funds indicator strongly indicates a much higher SP500 once retail investors turn more optimistic.
In summary, both retail and institutions are holding on to recent bear market concerns which leaves the only direction of equities higher than they are today.