Money on the sidelines

Many of us have heard there is a great deal of cash that has been sitting on the sidelines.  There are estimates in the hundreds of billions to over a trillion dollars of cash that is not being put to work.

In the recent past, money managers have been hesitant to put their clients money to work with all the uncertainty in the markets.  Yet these money managers don’t get paid to keep money in cash.  Eventually they have to put this money to work.

Of late we have seen, maybe not good news, but maybe a bottoming of the economy.  This could indicate that we may only have up to go.  The news media has reported a very small chance of a double dip recession.  This is met as good news to the market.

For the money managers to show they are using the money, they must have the stocks on their books prior to the quarter close.  This will allow them to publish ownership of shares in their prospectus. We have the end of the third quarter fast approaching.  What we may see is some of these money managers put a portion of the money back to work.  So where do they put the money.  Bonds are nearly dead, there is no interest for keeping the money in the bank, and the real estate market is a coin flip now.  The only other place to put the money, is in indexes and equities. If money managers start to buy stock/indexes, the results will drive the markets upward.

I have seen many times going into the end of the quarter where we get a rise in the markets due to this action.   I feel that the markets will rise going into the end of September.  October is a crap shoot, and I am more bearish going long term.

Happy Trading!

Peter Zomaya

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2 Responses to Money on the sidelines

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