High yields and a volatile stock market have investors piling into money market mutual funds. Holdings were near a record high of $4.8 trillion in the week ended Jan. 18, according to the Investment Company Institute . That’s down from the high of $4.814 trillion in total net assets the week ended Jan. 4 and above the prior peak of $4.79 trillion reached during the Covid lockdown of May 2020. Yet for retail funds, inflows are still climbing — the week ended Jan. 18 saw a $4.97 billion increase into retail money market funds, to bring net assets to a total of $1.74 trillion. “We have seen a lot of money coming into retail money market mutual funds since the Fed started tightening monetary policy,” said Shelly Antoniewicz, ICI’s senior director of industry and financial analysis. In fact, about $300 billion has flowed into retail money market funds since the end of February 2022, right before the Federal Reserve started ramping up interest rates, she said. As the central bank began hiking interest rates, the overnight federal funds rate followed. The Fed’s last hike in December brought the rate to a targeted range between 4.25% and 4.5%. Another quarter point increase is expected when the central bank meets next week. Retail assets make up about a third of the total money market fund pie, according to Peter Crane, founder of Crane Data, a firm that tracks money markets. The average yield on his Crane 100 list of the 100 largest taxable money funds is 4.13% and Crane expects soon after the next Fed rate hike, some money market funds will start breaking 5%. The poor performance of both the stock and bond markets in 2022 also made the funds more appealing, Antoniewicz noted. Another rocky year for stocks is expected, at least in the first half . A large majority of Americans may decide to just sit it out, according to the Allianz Life Quarterly Market Perceptions Study for the fourth quarter of 2022. Some 64% of those polled said they would rather have their money sit in cash than endure market swings, the study found. “Like any other investment, they are good for the right reason; a stable place for the assets one wishes to preserve,” financial advisor Mitch Goldberg, president of ClientFirst Strategy, said of money market funds. For those on Wall Street, the near-record net assets of money market mutual funds means more cash to put back into stocks and potentially fuel a rally. “But with money market yields higher than the dividend yield of the S & P…
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