There is lots of retail money on the sidelines in the U.S. mutual fund industry notes National Bank Financial.

In a research note NBF says that the scope for asset rebalancing by U.S. retail investors is large. The firm reports that, according to data released last week by the Investment Company Institute, retail investors had more of their assets held in money market mutual funds than in stock funds at the end of November, for the first time since 1992.

“Money market funds now account for no less than 40% of total net assets of U.S. mutual funds, the highest share since 1991 — with another 20% parked in bond funds,” NBF says.

Still, the firm doesn’t see the share held in money market funds rising to 1990 levels, when it was just shy of 50%. NBF notes that back then, the 3-month T-bill was yielding over 7% vs. over 8% for the 10-year Treasury.

“This time around, retail investors have the majority of their funds parked in 0% money market funds and very low yielding bond funds — despite the fact that the dividend yield on the S&P 500 is around 3%,” it observes.

IE