Money in and out of the market

@buynholdisdead asked for a discussion of how much money is “in and out of the market.”

Buynholdisdead is clearly interested in the stock market. Since I buy a lot of bonds, “the market” includes the bond market also.

The first data point is M1, the level of cash (and cash-like accounts). This is liquid deposits described as cash, checking accounts and other accounts that can be spent immediately. M1 is reported monthly. M1 peaked in May 2022 and has dropped since. The latest data point is January 2023 at $19.6 trillion. M1 is cash spent on everything from kiddie pacifiers to factory payrolls.

Next, let’s look at Retail Money Market Funds (MMFs) which is part of M1. This is probably more relevant to individual investors than M1 since many MMFs are held in brokerages and can immediately be invested in stocks and bonds. Retail Money Market Funds began to spike in June 2022 when the Fed began raising interest rates, closely followed by the yields of MMFs. This is also when the stock and bond markets tanked. The most natural place to put the proceeds from the sale of a stock or bond is a MMF at the same brokerage. The most recent data point is 2023-02-06, before the SVB crisis. The level is at an all-time high of $1.26 trillion.

Stocks are often bought on margin (with borrowed money). The level of stock prices is closely correlated with the level of margin borrowing. Margin borrowing began to fall in October 2021 and bounced back slightly in January 2023 (corresponding to the recovery from the 2022 lows). Since the Fed pushed interest rates higher, margin borrowing is more expensive now than before. Margin borrowing was $641 billion in January 2023, the latest data. Margin Accounts and Transactions at Securities Brokers and Dealers fell sharply in 4Q2022. Hedge funds also showed a sharp drop in Total Secured Borrowing Via Prime Brokerages in 3Q2022 (the latest data = $394 Billion).

I think the data supports the thesis that “there is a lot of money on the sidelines.” Cash in MMFs increased while margin borrowing decreased.

The total market capitalization of the U.S. stock market was $40,511,838.8 million ($40.5 Trillion) as of December 31st, 2022. The market value is the total market cap of all U.S. based public companies listed in the New York Stock Exchange, Nasdaq Stock Market or OTCQX U.S. Market, according to Siblis Research.

As for the bond market, SIFMA Research tracks U.S. fixed income markets, including issuance, trading, and outstanding data breaking out U.S. Treasuries, mortgage-backed securities (MBS), corporate bonds, municipal securities, federal agency securities, asset-backed securities (ABS), and money markets (outstanding data only).

YTD statistics include:

Issuance (as of January 2023) $1,534.8 billion, -16.5% Y/Y
Trading (as of January 2023) $972.1 billion, +0.5% Y/Y
Outstanding (as of 4Q21) $52.9 trillion, +5.5% Y/Y

The fixed income market is about 20% larger than the stock market. (The bond market data is a year earlier than the stock market data.) The duration of the fixed income market ranges from overnight to 30 years or more.

Rising interest rates hurt bond values directly, since the value of every bond falls when interest rates rise. The longer the duration, the larger the drop.

Rising interest rates hurt stock values in many ways, from the impacts on the underlying companies to the cost of margin borrowing.



Thank you Wendy that was very enlightening. I want to thank you for giving me that information.


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The problem is the herd mentality. Those who buy at the top do not buy at the bottom. And of course visa versa.

The smart money wont budge right now. Meaning those who buy at the bottom are keeping their money on the sidelines.

The amount of money is less important than understanding the clientele. The people who would buy at a bottom are very disciplined. In other words the money will remain for now on the sidelines.

…and the profit margins are tightening.

Ok Leap how, with all the dark pools, do you know the smart money is not buying right now? Do you have some information that shows they are sitting on the sidelines? What if it is the dumb money on the sidelines right now while the smart money is going long. I would like something that would prove your point like Wendy has shown.

Thank you,

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Watch the CMF

Note the date range 2020 into 2021

The weak hands keep applying some pressure here and there. But there is no squeeze etc…on the supply of shares.

Leap that doesn’t prove your point, That is just charts of the market that you are putting an interpretation to that you want to believe. I could also say that proves the smart money has been getting in since October of last year driving the market up to where it is at now. I would like to see something that shows how much money hedge funds or pensions have sitting in cash. Do you have something like that to share?


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You are half right but sorry I am not sharing the other half of my thoughts.

Besides if I did you would not appreciate that much. You have your own opinion you need to express.

I have my own way of dealing with this market.

LOL ok you must be holding an ace up your sleeve.


Again I gave you the charts to substantiate my opinion.

I am not giving you my ideas on entry.

I also have a really weird set of ideas on money management.

That’s ok Leap, Thank you for your opinion.


The charts represent trillions of dollars of other people’s opinions.