Money market madness
Last year, playing defense with your portfolio made sense. Now you may be missing out.
Money market madness
Last year, playing defense with your portfolio made sense. Now you may be missing out.
Last year, money markets were a safe play
Over $1 trillion flowed into money market funds in 2023 amid the most aggressive Fed rate hike cycle in history. With the Fed likely done raising rates, investors may see the forces that attracted them to cash last year turning into reasons to reallocate in 2024.
$1T
Inflows to money market funds in 20231
$5.89T
Total assets in money market funds as of 12/31/20232
It’s game time
Now is the time to make a game plan for how to best put your cash to work. Alternative investment strategies may provide your portfolio with the all-star power it needs to take on 2024.
Commercial real estate debt
Consider senior, floating rate loans backed by commercial real estate properties seeking to generate an attractive level of income, preserve capital and diversify a traditional portfolio.
Explore our CRE offeringsMulti-sector credit
Consider an allocation across public and private credit, based on greatest relative value opportunities to generate income and long-term capital appreciation.
Explore our credit offeringsMulti-strategy liquid alternatives
Consider a multi-strategy liquid alternative seeking to generate positive, low-correlated returns over a market cycle.
Explore our liquid alternative offeringsPrivate U.S. middle market equity
Consider investing in private U.S. middle market companies for differentiated sources of long-term growth.
Explore our private equity offeringsMoving to cash in 2023
Why moving to cash made sense in 2023:
Rate hikes: Fed Funds rose to 5.50% following the most aggressive Fed rate hike cycle in history.
High inflation: Expectations for “higher for longer” rates amid falling, yet persistently high inflation.
Economic pessimism: Concerns over the health of the U.S. economy and the potential for a recession.
Fixed income: Fixed income real rates finally turned positive.
It may be time to check your lineup. Money market assets keep growing despite yields declining.
Source: Bloomberg Finance, L.P., as of February 1, 2024.
Tackling cash in 2024
Why 2024 may be a good time to put cash back in the game:
Rate cuts: The Fed’s pivot at their December 2023 meeting explicitly called for rate cuts in 2024.
Falling inflation: Forecasts for slow but continued decline in inflation.
Economic optimism: Resilient U.S. corporate health and expectations for a soft landing.
Opportunity cost: Historically high yields and real returns outside of Treasuries—and high opportunity cost of staying in cash.
Real returns on cash may have peaked
Source: Bloomberg Finance, L.P., as of December 31, 2023. Data shows the 3-month T-bill return minus the rate of headline CPI inflation. The market-based forecast for 2024 utilizes current Fed funds futures pricing and consensus headline CPA forecasts, per Bloomberg.
Real return is what is earned on an investment after accounting for taxes and inflation.
Related resources
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Lara Rhame’s 5 for 5
Chief U.S. Economist Lara Rhame discusses five key challenges facing investors in 2024 and five opportunities that may provide income, growth and diversification.
Read the insights article
Family offices plan material increase to private markets
This chart of the week looks at family office CIOs’ plans to increase allocation to alts in 2024, specifically private credit and private equity.
View the chart of the weekView important disclosures
1. Source: Bloomberg Finance, L.P., as of February 1, 2024. Money Market Fund AUM is represented by ICI All Money Market Funds Total Nets Assets.
2. Source: St. Louis Federal Reserve as of December 29, 2023.
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