This was supposed to be a year of massive outflow from the money markets.

Jintong Finance and Economics APP noted that Wall Street forecasters had previously stated that all factors such as the Fed rate cut and the subsequent rise in stocks and ​bonds are in place, which will prompt investors to massively withdraw cash from money market funds. But their forecast was completely wrong!

Despite rate cuts and a surge in the stock market, both businesses and households continue to invest cash into money funds, causing the total assets held in these accounts to exceed 7 trillion US dollars for the first time this week. These funds are used to purchase US Treasury bonds and other short-term instruments, with investors now accustomed to benchmark rates above 5%, highlighting the attractiveness of benchmark rates above 5% to the investor base.

Even with rates now lowered to 4.5%, money market funds can still provide stable, nearly risk-free income, not only supporting the financial situations of many households but also to some extent offsetting the damage caused by rate hikes in other areas of the economy. With increasing signs indicating that the Fed may not further cut benchmark rates, many Wall Street professionals are now predicting that Americans will not quickly lose their love for cash.

Invesco's Chief Investment Officer and Global Liquidity Manager, Laurie Brignac, said: "I can hardly imagine anything that would cause institutional or retail investors to withdraw from money market funds. People think that when the Fed lowers rates, funds will flow out massively."

This is not only because money market rates are still close to peak levels, but also because the fact that they remain consistent with (and often higher than) the rates of most alternative currencies continues to attract investors.

Currently, the three-month US Treasury bond yield is about 4.52%, about 0.07 percentage points higher than the ten-year US Treasury bond yield. The Fed's overnight reverse repurchase agreement instrument (where money funds typically deposit their cash) currently has a yield of 4.55%.

In addition, banks quickly pass on the impact of the recent Fed rate cuts to consumers, making the money market a more attractive place for them to store cash.

Goldman Sachs' consumer bank Marcus followed the Fed's move, cutting its high-yield savings account interest rate to 4.1%, while competitor Ally Bank currently offers a rate of 4%.

According to Crane Data, a money market and mutual fund information company, in the week ending Wednesday, this helped money funds attract about $91 billion in funds, bringing total assets to $7.01 trillion. As of November 13, the seven-day yield of the Crane 100 money fund index tracking the top 100 funds was 4.51%.

Dmitry Securities' Gennadiy Goldberg, U.S. interest rate strategist, said that money market rates "remain attractive despite rate cuts, with significant economic uncertainty ahead, the yield curve still relatively flat.""Rates must fall sharply for fund inflows to slow. Historically, fund inflows will slow when yields drop to 2% or lower or lead to direct outflows."

This contrasts sharply with the forecasts of BlackRock Financial Management and other companies, which stated last December that a large amount of money fund assets would shift towards stocks, credit, or even farther bond curves.

Apollo Global management also stated in recent months that Fed rate cuts and steepening yield curves may prompt households to move cash elsewhere.

Although this has not yet happened, most market observers now expect a decrease in demand for money funds in 2025.

JPMorgan Chase said that historically, the industry tends to see fund outflows about six months after the Fed begins a rate cutting cycle.

In addition, due to the new government's relatively mild stance on antitrust, earlier this month Trump's election victory may stimulate a boom in mergers and acquisitions, prompting more companies to deploy the cash they have been holding back.

JPMorgan's U.S. short-term interest rate strategy manager Teresa Ho said: "I do not think we are at a turning point, but we are at a stage where the $7 trillion is possibly nearing its peak. Looking ahead to next year, it is hard to see a repetition of the situation in 2024."

However, Ho stated that some of the drivers of growth in money market fund assets are unlikely to change.

On one hand, compared to before the epidemic, companies are holding significantly more cash. In addition, as interest rates fall, corporate treasurers are inclined to outsource cash management for yield rather than handling it themselves, which helps cushion against any outflows of funds.

According to Crane data tracking the entire money market industry, institutional investors accounted for about half of the $700 billion inflows into money market funds this year. Data from the Investment Company Institute shows that the total inflows for this year to date amount to $702 billion, with total assets reaching a record $6.67 trillion as of the week ending November 13. This data is released weekly and does not include companies' internal money market funds.

Invesco's Brignac said: "For decades, retail investors have been accustomed to zero returns, so any return above this level seems like a good deal." However, "funds will still flow in," she added.