Eric Balchunas Says Rate Cuts Below 3% May Be Needed for Cash to Return to U.S. Stocks

Bloomberg senior ETF analyst Eric Balchunas said the S&P 500 is at record highs while money market fund (MMF) assets have also reached a new peak, creating a contrast of elevated stock prices alongside elevated cash holdings. According to Odaily, Balchunas said this structure suggests there is still substantial cash on the sidelines, but a meaningful shift back into equities may require interest rates to fall below 3%. He said that in the current environment of roughly 4% yields, investors tend to prefer MMFs with stable net asset values and no drawdown risk rather than bond ETFs. Balchunas added that the sharp drawdown in the bond market in 2022, including an approximately 13% decline in AGG, weakened investor confidence in traditional bonds and led MMFs to partially replace conventional bond allocations. He also said U.S. macroeconomic uncertainty, including factors related to U.S. President Donald Trump’s policies, has increased investor caution and contributed to a wait-and-see stance.