WSJ Discusses Americans' Pile of Cash
The Wall Street Journal writes "Americans Are Sitting on a Cash Pile as Stocks Reel," which tells us, "Cash is looking more and more attractive these days. Stocks tumbled after President Trump escalated his trade war against the rest of the world. But rather than scooping up shares trading at cheaper prices, many investors are opting to keep their cash on hand. Investors poured more than $60 billion into money-market funds in the first few days of April. That has sent assets in such funds to a record $7.4 trillion as of Thursday, according to Crane Data going back to 1972. Market watchers have closely monitored the trillions of dollars that have piled up in cash investments over the past few years, with some anticipating that much of it would eventually flood into stocks and power the market's next leg higher. Those expectations are on hold for now." The article explains, "Some analysts say that Americans have simply shifted their assets into higher-yielding money markets from traditional bank accounts, and expect that cash to stay put. Money poured into such accounts after the Federal Reserve began hiking rates in 2022, with some banks paying north of 5%. Cash is still paying higher yields than before the pandemic, even with the Fed's rate cuts last year. The average return on money-market funds is at 4.2%, down from 4.3% in December, Crane data show. In March, individual investors raised the share of cash in their portfolios to about 18.3%, up from 17.4% the prior month, according to the American Association of Individual Investors. Expectations for Fed rate cuts have climbed, but now it's because of the specter of a recession rather than easing inflation." The piece adds, "The decline in sentiment has cooled the “buy the dip” mentality that helped power the stock market to repeated highs and quickly recover from selloffs in recent years." See also Barron's "As Stocks Slump, Investors Pour Cash Into Money-Market Funds."
