Assets in money market funds have surged alongside rate hikes and are now sitting at all-time highs. But this trend could be short lived now that the rate-cutting cycle has commenced, and the yield offered by those funds is expected to become significantly less appealing.

We believe the reversal of this dynamic could fuel flows into investment grade and high yield bonds in the coming period. While demand for fixed income has been quite strong in recent times, a move away from money market funds would add another strong tailwind and support credit valuations.