U.S. equity funds have taken in money for 13 straight months, a record run, while money-market funds took in $166.4 billion in a single week. The banks reporting this week sit where both flows meet.
Investors heading into third-quarter earnings season are adding to both ends of the risk spectrum.
Money has flowed into U.S. equity funds every month for 13 months, the longest such run in EPFR records going back to 2000. At the same time, money-market funds took in a net $166.4 billion in the week to Oct. 7, the largest weekly inflow since April 2020, according to EPFR figures. Money funds worldwide hold about $8 trillion.
That single week's inflow equals about 1.5% of the money-fund assets EPFR tracks.
Cash yields
The Federal Reserve raised its target range to 3.75% to 4% in September, and money funds pass short-term rates through to investors within weeks. Treasury bills yield about 4.2%. With the 10-year Treasury yield at 5.24% at Friday's close and officials debating further increases, cash yields of roughly 4% offer income without the price risk of bonds or stocks.
The stock-fund streak shows the opposite impulse. The S&P 500 is near a record, four years into a bull market in which it has more than doubled, and analysts expect strong profits. S&P 500 companies are forecast to report earnings growth of about 29.6% for the third quarter, according to FactSet.
Bank reports this week
JPMorgan Chase, the largest U.S. bank, reports first on Tuesday, along with Goldman Sachs, Wells Fargo and Citigroup. Analysts expect JPMorgan to earn $5.93 a share on revenue of about $51.2 billion. Goldman Sachs is expected to report $12.86 a share on $16.8 billion, Wells Fargo $1.85 on $22.3 billion and Citigroup $2.65 on $23.7 billion. Johnson & Johnson, UnitedHealth Group and Domino's Pizza also report Tuesday.
Bank of America, Morgan Stanley, BlackRock and State Street follow Wednesday, then Charles Schwab, U.S. Bancorp and PNC Financial on Thursday, and Truist and M&T Bank on Friday. The KBW Nasdaq Bank Index rose about 0.5% in early afternoon trading on Monday ahead of the results.
The bank reports bear directly on the flows. Deposit costs, net interest income and the pace at which customers move cash into money funds and brokerage accounts will all show up in the numbers.
Market implications
One reading is that the two flows are consistent. Investors are keeping a growing cash cushion that pays well while staying invested in an earnings-led market, which leaves money available to buy any pullback.
A second reading is that the cash surge is defensive. A weekly inflow of this size, the largest in more than six years, may reflect investors preparing for disappointment from earnings, Wednesday's inflation report or the Fed's Oct. 28 decision.
What to watch
Bank commentary on deposit trends Tuesday and Wednesday, the next weekly money-fund data and the reaction to Wednesday's September consumer-price report will show which impulse is stronger.