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Wall Street observers say billions of dollars have yet to be put to work in the market, even as the major indices have scaled higher in recent months.


Dow Jones Industrial Average

was up nearly 27% between March 9, a 12-year low, and Thursday's close. Judging by the past, there's little that could have prepared the market for the length and strength of this rally.

The KBW Bank Index is up 86% since March 9, with banks such as


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Bank of America

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doubling or tripling off their lows.

Dow components


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are up roughly 70% and 50%, respectively, from their worst levels.

The question now is what will come of that money that has yet to participate.

"There's a lot of pent-up demand. Buyers come right back in

when there's a pullback," says Marc Pado, U.S. market strategist Cantor Fitzgerald. "Institutions want this market lower because in the last two weeks they have raised cash and lagged putting it to work."

Mutual fund managers are typically rated on their relative performance, and at a certain point, holding all that cash starts to weigh them down, says Bill Stone, chief investment strategist at PNC Wealth Management.

"So you see a lot of times on these selloffs, they're buyers," he says. "They're looking at it the opposite of how they used to. They're trying to get long so they can keep up."

The pressure is mounting, because a lot of these funds "got smacked on the way down, then missed the way up," says Stone. "As for hedge funds, they were on the right side the way down, but there are very few who caught the right side of this one."

Still, many people are cautiously optimistic, at best, the longer the rally goes on. Some are outright skeptical.

"All these people who are very negative are arguing that it's not going to be a robust economic recovery," says Pado. "But it's a supply and demand question. The supply of stock vs. the demand could easily drive market prices higher."

At one point, M3 (an extensive money-supply measure) was worth more than the stock market altogether, says Pado. "It's a teeter-totter. One is going up, and the other is going down, but it's a massive ratio to have sitting on the sidelines. The reality is if there's a lot of money sitting on the sidelines and they have to pay up a little to get something, they will."

Jeffrey Saut, chief investment strategist at Raymond James, gathers there's about $9 trillion in cash and cash-like investments, and about $4.1 trillion in fixed income. "So there's a little more than $13 trillion, which believe it or not is comparable to total household debt."

One parking place for some cash is money markets. While it's difficult to know for sure owing to factors such as inflation, Pado figures that before this recession, in the last decade there might have been around $1.6 trillion in money markets during a bull market and about $2.3 trillion during a bear market.

In contrast, money market funds held $3.79 trillion as of May 13, according to Investment Company Institute. That total increased by $2.33 billion from the week before, but is still down from $3.90 trillion on March 4, the last time a reading was taken before the market's multiyear low.

Total assets of institutional money market funds have also fallen since March 4 to the latest reading, but they have increased on a net basis since March 18.

They fell from $2.546 trillion on March 4 to $2.496 trillion March 18. While that money was flowing out of money market funds, the Dow increased 8.9%. Since March 18, however, the assets of institutional money market funds have fluctuated. As of May 13, they stood at $2.514 trillion. Between March 18 and May 13, while money was accumulating in those funds, the Dow increased another 10.7%.

In that same span, however, assets of retail money market funds decreased from $1.36 trillion to $1.28 trillion.

As for exactly what that means, the picture might only become clear when viewed in hindsight, says Stone.

Doug Roberts at says that a good part of the recent rally has been driven by short-covering. "If people are short, then things can change relatively rapidly. When markets go down, you see a violent spike up, but nothing is certain, so we really don't know."

One thing that is certain is that "there's plenty of fuel to keep the thing going," says Stone. "At least I know I can put that in the plus column."

But, of course, it's just impossible to figure out how much will go in, says Raymond James' Saut. "There were people who got so burned, they sold at the lows, and they're not going to go back for years. It seems there's nowhere to go but up, but sometimes that sidelined cash stays on the sideline."