Record Highs for Money-Market Fund Assets and Domestic Bank Deposits

Continual Inflow into Money Markets

Despite the recent volatility in stocks, money markets have experienced a consistent inflow of funds for six consecutive weeks. In the last week alone, an additional $23.4BN was added to the total assets under management (AUM) in money market funds, bringing the total to a new record high of $6.324TN.

Significant Inflows in Six Weeks

Over the course of six weeks, there has been an inflow of $188BN, marking the largest increase since the beginning of the year's seasonal flows.

Surge in US Bank Deposits

Simultaneously, US banks experienced almost $53BN of deposit inflows in the week ending 09/04. This surge pushed the total seasonally-adjusted deposits to their highest level since before the SVB collapse. On a non-seasonally-adjusted basis, US bank deposits soared by $118BN last week, also reaching a level not seen since before the SVB incident.

Domestic Bank Deposits Exceed Pre-SVB Crisis Levels

Excluding foreign deposits, domestic bank deposits have seen a significant increase on both a seasonally-adjusted (+$60BN) and non-seasonally-adjusted (+$137BN) basis, surpassing pre-SVB crisis levels.

Rebound in Domestic Bank Loan Volumes

Following last week's crash, domestic bank loan volumes have shown a modest rebound.

US Bank Reserves and Equity Market Cap

While US bank reserves at The Fed have been on a downward trend, the US equity market cap has stalled at record highs. This situation poses a question: is it more likely that stocks will collapse back to reality (a hard landing), or that there will be a sudden surge in reserves at The Fed?

Bottom Line

This recent surge in money-market fund assets and domestic bank deposits to record highs is a noteworthy financial event. The consistent inflow into money markets, even amid stock market volatility, and the rebound in domestic bank loan volumes are significant indicators of the current financial climate. However, the question remains: will the stock market face a hard landing, or will there be an unexpected surge in reserves at The Fed? What are your thoughts on this development? Feel free to share this article with friends and engage in a discussion. Don't forget to sign up for the Daily Briefing, available every day at 6pm.