By The Numbers
By the Numbers: ETFs and cash
George Moriarty, chief content officer at InvestmentNews, looks at the vast amount of money investors have been pulling out of cash holdings in recent months and why that is happening.
Transcript:
I’m George Moriarty, and this is By The Numbers!
Today’s number is 5.4, As in $5.4 billion that flowed out of the $20 billion iShares Short Treasury Bond exchange traded fund over a recent 14 weeks. But this is just one example of how investors are abandoning cash holdings at a record clip.
as momentum has continued to build behind 2020’s risk rally, The $14 billion SPDR Bloomberg Barclays 1-3 Month T Bill ETF saw $2.4 billion pulled out of it over 10 weeks ….
Earlier this year, investors had accumulated record amounts of cash due to concern over the impacts of the pandemic on the global economy. And that had assets in money market mutual funds soar to a record $4.8 trillion in late May.
In addition to stocks surging and corporate bonds looking increasingly appealing, the Federal Reserve may have helped cash come off the sidelines thanks to its restated commitment to keep interest rates near zero for the foreseeable future.
The exit from ultra-short duration ETFs is also likely a result of investors trying to eliminate the “cash drag” in their portfolios by reinvesting in higher-yielding assets, according to Dan Suzuki at Richard Bernstein Advisors.
Suzuki said cash is acting as a huge “dead weight” in some portfolios and investors are probably chasing higher returns, which means moving up the risk spectrum.
Keeping an eye on these numbers will help you see where investors are leaning over the days and weeks ahead.
I’m George Moriarty, thank you for watching, and from my home office to yours, stay safe, and we’ll see you next week.
