In 2024, exchange-traded fund inflows have already broken monthly records, with managers predicting a potential impact from the money market fund boom before the year-end. Nate Geraci, president of The ETF Store, highlighted the significant $6 trillion-plus parked in money market funds as a wildcard for the remainder of the year.
According to the Investment Company Institute, total assets in money market funds soared to a new high of $6.24 trillion in a recent week. This surge in assets has been attributed to investors awaiting a Federal Reserve rate cut, signaling a potential decrease in money market fund yields.
As rates fall and money market fund returns diminish, Matt Bartolini of State Street Global Advisors anticipates a shift in capital towards stocks, higher-yielding fixed income products, and specific areas of the ETF market. Bartolini specifically highlighted the increased interest in gold ETFs, which have seen substantial inflows in recent months.
Looking ahead, Geraci foresees that large, megacap ETFs could benefit from this transition. He is optimistic about ETF inflow levels potentially surpassing the previous record set in 2021 at $909 billion. Geraci believes that unless there is a significant stock market downturn, investors will continue to allocate capital towards ETFs, potentially breaking the previous record.
The influx of assets into money market funds and the expected rate cut by the Federal Reserve could have a substantial impact on the ETF market in 2024. With the potential for capital to flow from money market funds into other investments, such as ETFs, stocks, and higher-yielding products, the industry could experience significant growth in the coming months. As investors navigate the changing landscape of the market, ETF managers are cautiously optimistic about the future of the industry and the potential for record-breaking inflows.