🚨 What worries me the most

March 3, 2025 >> Macro Investors

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Dear all,

I’ve been watching markets for a long time, and I can tell you - there’s something unsettling about what’s happening right now.

We’ve seen bubbles before. We’ve seen euphoric rallies. But this? This is something different.

For the first time in history, cash allocations in US equity funds have collapsed to just 1.5%. Think about that for a second. The lowest. Ever.

It’s easy to ignore this number when markets are moving higher every day.

But history has taught me that when investors go all-in, leaving nothing on the sidelines, the risk of an ugly reversal rises exponentially.

The last time we saw cash levels this low?

Well, actually, we never have. But we’ve been close - back in 1999, before the dot-com bubble burst, and again in 2007, right before the financial crisis.

And both times, when the tide turned, there was no cash left to cushion the fall.

And that’s what worries me the most.

History has a way of repeating itself, especially when people start thinking 'this time is different.'

🚨 Cash is trash, according to US equity funds.

Cash allocation of US equity funds has declined to just ~1.5%, the lowest on record.

The Fear of Missing Out (FOMO) has never been greater. This creates downside risk.

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