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The last two times money-market fund assets surged — in 2008 and in 2020 — the Federal Reserve slashed interest rates. Hartnett is fond of the saying, “markets stop panicking when central banks start panicking,” and he noted a surge in emergency Fed discount window borrowing has historically occurred around a big stock-market low.
History, according to the BofA team, says to sell the last interest rate hike. “Credit and stock markets are too greedy for rate cuts, not fearful enough of recession,” they say. After all, when banks borrow from the Fed in an emergency, they tighten lending standards, which in turn results in less lending, and that leads to less small-business optimism, which eventually cracks the labor market.
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