|Why This Metric Matters
| This figure shows the percentage of assets under management that equity mutual fund managers have in cash or cash equivalents like money market funds. When this number rises, it indicates that money managers are growing cautious. That's typically bad news short term -- as money managers are reluctant to spend that cash on equities. But it's often seen as a positive for the market looking out a little further, as managers can be expected eventually to use that cash to load up on stocks. So, short term, rising cash levels can be seen as a negative. Longer term, it's a potential positive. Consider this: In October 1990, cash levels reached nearly 13%. The market rallied sharply right after that: The
bottomed that month but was trading almost 30% higher within a year. In March 2000, cash levels reached their lowest levels of the decade, just as the
and S&P 500 reached their all-time highs. Since then, the indices have fallen and cash levels in mutual funds have begun to rise.