Investors flocked to money market funds leading up to and on election day. During the week of November 6th (election week), investors purchased a massive $127 billion worth of global money market funds which was the largest weekly purchase of money market funds since the beginning of the year1.
As investors stashed cash into the safe haven asset that is a money market fund (remember money market funds do not fluctuate in price but pay monthly interest), they hoped to protect themselves from any upcoming volatility. Assuming those investors did not sell these new money market positions and reinvest into the market, they would have missed out on one of the best weeks of the year in capital markets (at least for equities). U.S. Large Caps returned almost 5%, while their U.S. Small Cap counterparts returned over 8% for the week!
Source: FactSet; Data is from December 29, 2023 – November 8, 2024.
We never know exactly what markets are going to give us on any one specific day, week, or month. In October, the People’s Bank of China (PBOC) announced one of the largest stimulus packages since the COVID pandemic. Within three weeks of the stimulus announcement, the Chinese stock market had returned over 39 percent. Keep in mind, Chinese equity markets had returned a measly 0.5% for the year leading up to that announcement, going from one of the most forsaken public equity markets to one of the most loved in a matter of weeks.
Unless you have inside information on the future (looking to Marty McFly here), staying invested in the market is vital to long-term success for investor portfolios. Whether it’s election results, Fed announcements, or earnings results of your favorite company, volatility is a part of investing. Only time can tell whether or not that volatility is to the upside or downside. We encourage investors that may have concerns about market conditions to talk to their financial advisor to help them through these tumultuous times. If you or someone you know would like to learn more about capital markets and how they may impact your portfolio, please contact us at [email protected].
Article Source1: Global money market funds saw large inflows on election caution | Reuters
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