Fed's rate cuts to trigger a $2 trillion exodus from money-market funds, where will the money go? Here's what Apollo's Torsten Slok says
money-market funds, according to reports.
Apollo chief economist Torsten Slok is of the opinion that the rate cuts can trigger a $2 trillion exodus from money-market funds, with assets held in money-market funds hit an all-time high of $7 trillion this month. With the Fed Reserve cutting interest rates, money will start moving out of these funds, and will generate more value when it enters higher-yielding assets during a folio shift.
Asset relocation like these could help generate more value, but it may necessarily not be a great news for stocks and the US stock markets, but would instead result in inflows into the credit markets, according to a Business Insider report.
When the $2 trillion money flows in after the Fed Reserve begins cutting rates, is now the primary question in the mind of Apollo's Torsten Slok. Higher-yielding assets such as credit, including investment grade private credit could be leading locations where this massive money bulk could be flowing to.
Credit fundamentals are expected to stay robust during this period, as per Slok, which somehow is a reptation of his earlier statement that credit markets were appearing well-positioned for further inflows after the election.
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