Any discussion of where asset prices will go has to consider the amount of money on the sidelines. Cash is often called the sidelines, but it is a choice. Right now, it is an easy choice given current rates relative to inflation.
MMF assets are now at $6 trillion. The number has increased by $1.5 trillion in the last year. This should be expected. A market downturn will increase this number. Similarly, a belief that asset prices will rise will generate strong movement from cash to these other assets. The excess of credit and money is tied to the increase in cash. This cash can also be used for purchasing goods which can offset the threat of a recession. Cash is still king.
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