Exchange-traded fund inflows have already exceeded monthly record levels in 2024, and managers expect the boom in money market funds to impact inflows before the end of the year.
“With that $6 trillion-plus parked in money market funds, I think that's really the biggest unknown for the rest of the year,” Nate Geraci, president of The ETF Store, told CNBC's “ETF Edge” this week. “Whether it's inflows into REIT ETFs or just the broader ETF market, that's going to be a real potential catalyst to keep an eye on.”
Total assets in money market funds hit a new high of $6.24 trillion last week, according to the Investment Company Institute. Assets have reached their highest levels this year as investors await a rate cut from the Federal Reserve.
“If that yield goes down, the yield on money market funds should go down too,” said Matt Bartolini of State Street Global Advisors in the same interview. “So if rates go down, we can expect some of the capital that was stored in cash when cash was cool again to flow back into the market.”
Bartolini, head of research at SPDR Americas at the firm, sees money flowing into stocks, other higher-yielding areas of the bond market and parts of the ETF market.
“I think one of the areas where things will probably go a little better is Gold ETFs,” Bartolini added. “They've had inflows of about $2.2 billion in the last three months, a really strong close last year. So I think the future is still bright for the whole industry.”
Meanwhile, Geraci expects large megacap ETFs to benefit. He also believes the transition could be promising for ETF inflow levels as they approach 2021's record $909 billion.
“Assuming stock prices don't experience a massive decline, I think investors will continue to invest here and ETF inflows can break this record,” he said.
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