Crane in WSJ: Wall of Cash Staying Put
The Wall Street Journal writes, "U.S. Investors Are Flush With Cash, and Happy to Keep It There." The piece says, "U.S. investors are sitting on a pile of cash. Even with rates now coming down, many are in no rush to move it. Assets in money-market funds reached a record $7.7 trillion last week, with more than $60 billion flowing into those funds during the first four days of the month, according to Crane Data, an industry researcher. The latest rush into money funds began in 2022, when the Federal Reserve started raising rates. The yields on these funds, which typically hold short-term government debt, also rose, giving investors higher returns on their cash than they have had in years. Many have kept a larger slice of their portfolios in these cash-like investments ever since -- as the stock market raced to record highs." They explain, "That is unlikely to change soon, even with the Fed now cutting rates. Money funds are still yielding a lot more than what they had in the 2010s and early 2020s, when the financial crisis and then the Covid pandemic pushed rates to ultralow levels. With stocks by some measures now more expensive than ever, some investors are willing to wait for discounts. And it will take more than one (or two or three) rate cuts to change their minds. 'It is indeed a 'wall of cash,' because it ain't going anywhere,' said Peter Crane, president of Crane Data." The article adds, "Money-market funds offer a seven-day annualized net yield of 4.1% as of the end of August, according to Crane's index of 100 such funds. The national average annual yield for a bank savings account is a paltry 0.6%, according to a survey by Bankrate.... The cash stash in money-market funds is likely to keep growing through the end of the year, said Crane, who said he wouldn't be surprised to see total assets in the funds surpass $8 trillion by 2026. November and December are usually strong months for money funds, he said. Companies and governments might also temporarily park cash in money-market funds, he said, since their yields don't adjust to Fed moves as quickly as Treasurys do."
