Share of U.S. Equity Mutual Fund and ETF AUM Passive U.S. equity funds surpassed active ones in 2020. Investors prefer them due to their lower fees, potential tax benefits, and the belief that active fund managers cannot consistently outperform the market. Image: Goldman Sachs Global Investment Research
% of Large-Cap Mutual Funds Outperforming their Benchmarks A concerning 69% of large-cap mutual funds have underperformed their benchmarks year-to-date, disappointing investors seeking above-average returns. Image: Goldman Sachs Global Investment Research
Flows into Money Market Funds Investor interest in U.S. government money market funds continues to be strong, driven by their current attractive yields, high level of safety and liquidity. Image: Goldman Sachs Global Investment Research
Market-Implied Change in Fed Funds Rate Traders are anticipating a total of 75 bps in interest rate cuts by the Federal Reserve over the next 12 months. Image: Goldman Sachs Global Investment Research
Interest Rates – Fed Funds Futures Curve After the Federal Reserve’s recent meeting, the slope of the fed funds futures curve has increased slightly, indicating a shift in market expectations regarding future interest rate movements. Image: The Daily Shot
Federal Funds Target Rate While the Fed has begun easing monetary policy, the current federal funds rate remains notably above their estimated neutral rate, with plans for further gradual reductions to bring it closer to neutral over time. Image: Goldman Sachs Global Investment Research
U.S. Money Market Fund Assets and Fed Funds Rate The current environment suggests that a substantial amount of capital is poised to flow back into equity markets, driven by expectations of favorable economic conditions and monetary policy adjustments. Image: Goldman Sachs Global Investment Research
U.S. Money Market Fund Assets vs. Federal Funds Effective Rate U.S. money market funds are sensitive to changes in interest rates, and historical trends indicate that they often experience outflows approximately 12 months after an initial Fed rate cut. Image: Real Investment Advice
S&P 500 Index and Fed Funds Effective Rate While Fed rate cuts typically provide a short-term boost to market sentiment, historical trends suggest they often coincide with economic slowdowns. Image: Real Investment Advice
U.S. Domiciled Mutual Funds While U.S. money market holdings remain historically low, equity allocations are high, reflecting a significant shift in investor behavior towards riskier assets in pursuit of higher returns. Image: Goldman Sachs Global Investment Research
U.S. Recessions – 6-Month Fed Funds Minus Current Fed Funds Rate Historically, U.S. recessions have often followed periods of bearish short-term interest rates, particularly when the Fed cuts rates in response to economic downturns or signs of slowing growth. Image: BofA Research Investment Committee