Exchange-traded fund inflows have reached record levels in 2024, with managers predicting a potential impact from the money market fund boom before the end of the year. Nate Geraci, president of The ETF Store, highlighted the significant amount of $6 trillion parked in money market funds as a major factor to watch for the remainder of the year. The influx of funds from money market accounts into various ETFs, including REIT ETFs, could serve as a catalyst for the market.
Money Market Funds at an All-Time High
Total assets in money market funds hit a new high of $6.24 trillion, according to the Investment Company Institute. The surge in assets this year is attributed to investors awaiting a Federal Reserve rate cut. With the anticipation of lower yields on money market funds due to rate cuts, investors are likely to reallocate capital from cash into more lucrative investment opportunities, such as the stock market, high-yield fixed income securities, and ETFs.
Matt Bartolini of State Street Global Advisors noted the potential inflow of capital into gold ETFs, which have seen approximately $2.2 billion in inflows over the last three months. He emphasized the positive outlook for the industry, particularly following a strong performance towards the end of the previous year. The shift from money market funds to alternative investments like gold ETFs reflects investors’ search for higher returns in a lower-yield environment.
Geraci anticipates that large, megacap ETFs stand to benefit from the transition away from money market funds. He believes that ETF inflows could surpass the 2021 record of $909 billion, provided that stock markets remain stable. The promise of breaking previous records in ETF inflows highlights investors’ confidence in the market and their willingness to allocate capital towards different asset classes.
The ongoing money market fund boom is expected to have a significant impact on ETF inflows in the coming months. As investors seek higher returns amid lower interest rates, the reallocation of funds from money market accounts into various ETFs presents opportunities for growth and diversification. With the potential for record-breaking inflows and a shifting investment landscape, the market remains dynamic and ripe for exploration.