• Money market funds attracted $166.4 billion last week, the largest inflow since April 2020, pushing total assets to roughly $8 trillion.
  • BofA's Michael Hartnett argues that sustained Federal Reserve easing is needed to unlock sidelined cash: "No rate cuts, no cash cuts."
  • The Fed's September meeting raised rates to 3.75%–4.00%, and minutes released October 7 showed most officials favored another hike by year-end.

Cash Hoard Grows as Fed Tightens

Bank of America (BAC)'s chief investment strategist Michael Hartnett has a message for investors betting on a tidal wave of cash rushing into stocks: not so fast. In a note published Friday, Hartnett emphasized that the roughly $8 trillion sitting in U.S. money market funds won't be deployed into riskier assets until the Federal Reserve signals a sustained easing cycle. "No rate cuts, no cash cuts," he wrote, according to people familiar with the matter.

The call comes as money market funds attracted $166.4 billion in the week ended October 7, the largest weekly inflow since April 2020, according to Investment Company Institute data. The surge pushed total assets to about $7.89 trillion as of September 30, consistent with the scale of the "$8 trillion" figure. The inflows underscore that investors are still prioritizing income and liquidity over equity exposure, even as major stock indexes hover near record highs.

Fed Minutes Reinforce Tightening Bias

The Fed's September meeting raised the policy-rate range to 3.75%–4.00%, and minutes released Wednesday showed that most participants considered another increase appropriate before year-end, subject to incoming data. The next decision is scheduled for October 27–28. Officials described solid economic growth, a broadly stable labor market, and inflation that remains above the 2% target. They identified energy disruptions, tariff effects, and AI-related investment demand as contributors to price pressure.

That combination reduces the case for immediate easing and keeps short-term investments competitive with riskier assets. "The Fed is still leaning hawkish," said a portfolio manager at a large asset manager, who asked not to be named. "Until that changes, cash remains king."

Hartnett's Market Calls: A Mixed Bag

In the same note, Hartnett outlined several tactical calls, according to the summary reviewed by Bloomberg:

  • Stocks: Expect risk-off into the midterms, with potential for a 10% move in either direction.
  • Tech: Avoid adding exposure, but prefer the Magnificent Seven over semiconductors.
  • Bonds: Start buying 30-year Treasuries on peak-yield potential.
  • Small Caps & REITs: Selective buying opportunities.
  • Gold & Commodities: Stay long.
  • Emerging Markets: Stay long; China tech looks interesting.

Hartnett also noted that 50% of global indexes are below key moving averages, and the BofA Bull & Bear Indicator fell to 8.1 from 8.8, still in sell territory. These views are attributed to Hartnett and BofA, and some details could not be independently verified.

Context: Why Cash Remains Attractive

The policy pressure is global. The Fed minutes noted elevated inflation abroad and an ECB rate increase linked to energy-price pressures from the Middle East conflict. Higher foreign rates can affect exchange rates, international capital flows, and the relative appeal of emerging-market investments.

The long-bond call is particularly consequential. Fed officials attributed rising Treasury yields partly to stronger economic data, geopolitical uncertainty, and heavy private borrowing to finance AI infrastructure. A Fed cut alone therefore would not necessarily eliminate upward pressure on long-term yields.

Bank of America: Solid Fundamentals

This is principally a market-strategy story, not an announcement about Bank of America's own cash holdings or operating strategy. The bank is a large diversified group with consumer banking, wealth management, corporate and investment banking, and trading businesses. Its second-quarter release reported approximately $3.5 trillion in assets.

For Q2 2026, BofA reported net income of $9.1 billion, revenue of $31.6 billion (up 15% year over year), earnings per share of $1.21 (up 34%), and net interest income of $16.0 billion (up 9%, before the fully taxable-equivalent adjustment). The bank returned approximately $8 billion to shareholders through dividends and repurchases. Brian Moynihan remained chair and CEO; no leadership change or restructuring was announced.

What to Watch

The near-term test for Hartnett's thesis will be the Fed's October decision and subsequent inflation and employment data. Most officials favor another hike by year-end, but left future decisions conditional on incoming evidence. Longer term, two scenarios matter: if inflation eases without a sharp growth slowdown, eventual cuts could reduce cash income and make longer-duration assets more attractive. If inflation persists or easing follows economic deterioration, cash may retain its appeal, or weaker earnings and credit conditions may offset the benefits of lower rates.

"The $8 trillion on the sidelines is an investment shorthand, not a promise of $8 trillion in future stock purchases," said a strategist at a rival firm, who declined to be identified. "It's about the willingness and ability to reallocate."

Bank of America declined to comment beyond the published note. An attempt to reach Hartnett directly was unsuccessful.

Correction: An earlier version of this article misstated the week of the $166.4 billion inflow. It was for the week ended October 7. Additionally, the $8 trillion figure and the $166.4 billion inflow are from different reporting periods and should not be combined as a single dataset.