HIBL - Flush Money Market Funds Typically Mean Rally
2024-05-05 00:01:00 ET
Summary
- Shorting T-Bills pushes rates higher and out of sync with the current level of pessimism.
- T-Bills have inverted, leaving 10yr Treasury rates -1.82% below T-Bill rates June 2023.
- Investors should remain focused on well-managed companies now reporting upside surprises with raised guidance.
Investing is more art than science, i.e., mathematical models. The last 70yrs experts have tried to convince investors and themselves that Modern Portfolio Theory operated by computers produced the highest returns over time. Today, an overwhelming majority using this tool is still expecting a recession, and some of this is reflected in the record high Retail Money Fund level (S&P 500 vs Retail Money Funds) . This level and its very rapid rise has a historical relationship with pessimism. But it is identifiable with market lows during a recession. It is a pattern everywhere in investment history that high pessimism indicates major market lows and moderate pessimism correlates with moderate market dips. The history shown is from Jan 1980, encompassing 6 recessions. Psychology is better at calling market lows than computers using Modern Portfolio Theory....
Flush Money Market Funds Typically Mean Rally