Can Money-Market Funds Keep Powering the Stock Rally?

Money-market fund assets exceeded $6 trillion by mid 2024 as the Federal Reserve held its policy rate in a 5.25 to 5.5 percent range, keeping yields near 5 percent. Cash moved out of the Fed’s overnight reverse repurchase facility, which fell from a peak above $2 trillion in 2022 to under $600 billion by mid 2024, and into Treasury bills and repo. Increased Treasury bill issuance after the 2023 debt ceiling resolution absorbed that cash and supported short-term funding for dealers. Money-market funds’ lending through repo helps stabilize equity market making and reduces volatility, while expected rate cuts can prompt asset allocation shifts from cash into equities and ETFs. SEC money-market fund reforms adopted in 2023 raised liquidity and introduced a new fee framework, aiming to reduce run risk. Corporate treasurers are using government money funds and short Treasury ladders to earn yield, manage runway, and time buybacks or capex as funding conditions evolve.

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