INVESTORS TIMID WITH ALL-TIME HIGH CASH BUILDUP

May 20, 2020

Over the years, you have surely heard me talk about “cash buildup”. When cash builds up on the sidelines, sooner or later it is deployed back into the market, which pushes the market higher. This can happen for a long period of time. Well, investors are sitting on a record amount of cash/money market holdings. This does not even include short, intermediate, and long duration treasuries. Money market assets are at $4.8T, which is an all-time high for institutions and retail. They are scared. This is hardly a bullish stance by investors, but it is great for our investors. 

IBB

We realize investors have the wrong impression and that lots of firepower has been used up as investors chased this rise in the market, but this is not what has happened. Again, money market assets are at all-time highs, totaling $4.8T, of which 2/3 is institutional. 

SPX 

BuyLine


Total institutional money market assets are at $3.2T, exceeding the previous all-time high (ATH) of $2.5T on January 28, 2009. Total retail money market assets are at $1.57T, exceeding the prior ATH of $1.4T on January 14, 2009. In other words, there is a lot of cash that will find its way back into the stock market sooner or later. As we all know, treasury and money market are not paying anything, it is just a place to hold money until they have the confidence to start buying again. FOMO, or fear of missing out, is taking place, and you are watching them push our investments higher. As you all know, the HCM BuyLine® turned positive 6 weeks ago. This is why you have HCM on your side, to take the emotion out and trade what is actually happening, not what you think will happen. 

TLT

COVID-19 Update

There were two notable positive developments in the COVID-19 crisis this week.  First, the Moderna announcement of the initial success of its mRNA trial, with the first 8 recipients of the vaccine showing high levels of antibodies, enough to prevent cell infection. And second, the surprise easing of restrictions by California, which is fairly broad and includes many retailers, churches, and sporting events by June 1. (New York Gov. Cuomo also encouraged sports teams to consider opening in NY.) Whether states have sufficient health metrics to justify re-opening is becoming secondary to the desire of citizens to emerge from their shelters (and nobody wants the goal posts moved.)

According to the World Heath Organization, there are 8 vaccines in clinical evaluation today (including Moderna) and 110 in preclinical evaluation. This is 118 shots at creating a vaccine. That is a lot of research and momentum, and really raises the prospects of a vaccine arriving sooner than the "12-18 months" timeline given by many health experts.  This is positive news.

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