BofA strategist Michael Hartnett says investors are shifting into money-market
funds at the fastest pace since the COVID pandemic and that trend is unlikely to
reverse near term unless the Fed implements large-scale monetary easing and
sustained rate cuts. Week to Oct. 7: money-market funds net inflows $166.4bln,
bond funds $33.8bln, equity funds $12.4bln — both far smaller than MMF flows.
Hartnett: If the Fed does not cut, investors will not reduce cash holdings. He
sees the US midterm elections as the most likely catalyst for outsized equity
volatility in 2027 and, given the current tightening cycle and ongoing
tightening of financial conditions, favors a defensive reduction in risk
exposure ahead of the midterms.
