Post-U.S. election results and the announcements of successful COVID-19 vaccines spurred on strong flows into equities last month. In fact, November’s $81 billion of inflows into equity ETFs was the highest on record. While $81 billion is certainly substantive, history would show it may be just the tip of the iceberg. The chart below illustrates that after the Great Financial Crisis (GFC) it took several years for the mountain of cash in money market funds to be deployed.
Source: Variant Perception 

Current estimates of cash are nearly $5 trillion, significantly higher than the previous record set back in the GFC of $3.8 trillion. The combination of low money market yields (currently averaging less than 0.1%) and the recent removal of significant macro overhangs could be a powerful motivator for investors to allocate cash that is on the sidelines. Any sustained rotation could be a healthy tailwind to equity markets as we look ahead. 

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