Daily Upside on Money Funds in '26
The Daily Upside posted an article titled, "Money Market Funds Attracted $935B Last Year. Expect Half That in 2026." It states, "Money market funds attracted $935 billion in new assets last year, surpassing 2024 totals and defying the belief that Federal Reserve rate cuts would trigger mass outflows, according to Morgan Stanley research. The firm expects continued growth in 2026, though at a slower pace, with another $500 billion in inflows projected to push total assets past $8.6 trillion by year-end. Money market funds are expected to remain a core tool for many advisors even if interest rates drift lower. However, financial planners are staying flexible and considering other investing options, too." The piece continues, "Money market funds -- which invest in low-risk, short-term debt -- surged in popularity as the Fed began hiking rates in 2022. That rate cycle peaked in mid-2023, with the benchmark reaching between 5.25% and 5.5%. Morgan Stanley analysts found that in 2025: Retail investors accounted for 34% of total money-market inflows, while institutional investors made up 64%; Money market fund yields have topped 3% only twice over the past two decades. For roughly half that period, yields were effectively zero as the Fed held rates at the lower bound." They write, "Even after multiple rate cuts, the federal funds rate currently sits between 3.5% and 3.75%, keeping money market funds attractive for yield-hungry clients. As of Monday, the 7-day yields for the Vanguard Federal Money Market Fund and the Fidelity Government Money Market Fund were 3.69% and 3.43%, respectively. The Crane 100 Money Fund Index from Crane Data stood at 3.58%. 'Yields are still attractive [compared] to where they’ve been for the past 20 to 30 years,' said Pete Crane, president of Crane Data, adding that rates on bank deposit products -- including checking accounts, savings accounts and certificate of deposits -- remain far less competitive. 'The worst money fund is going to outperform the best bank deposit over time by a tremendous amount.'"
