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Rekenthaler Report

Investment Signals Would Be Great, If They Worked

Their stories are compelling, but their results are not.

False Prophets
Two weeks ago, The Wall Street Journal posited that that money market assets might sustain the equity bull market. "Ready to Boost Stocks: Investors' Multitrillion Cash Hoard" notes that "nervous investors have socked away $3.4 trillion in cash. But stocks are rising and their nerves are calming, leading bulls to view the huge cash pile-up as a sign that markets have room to grow higher."

In other words, when investors put their money market holdings to work, stocks will advance. That sounds logical. But if money market outflows stimulate stock prices, then why haven't money market inflows caused the reverse? So far this year, money market funds have recorded their highest net sales since 2008, yet the S&P 500 is up 26%.