WSJ Says Investors Adding Cash
Yesterday's Wall Street Journal warns that "More dollars shifting to money funds is [a] bad omen for longevity of [a] market rebound" in its article, "Cash Run Threatens Pickup in Stocks." They comment, "Investors are increasing their cash holdings at the fastest pace in a decade, highlighting doubts about the durability of the stock market's early 2019 rebound. Assets in money-market funds, which are generally used as a proxy for net new cash flows, have grown by more than $2 billion this month, according to Lipper data through Thursday. That comes on top of the $190 billion investors added to the funds in the final three months of last year, their biggest deposit since 2008." The Journal continues, "Cash allocations had been trending downward throughout most of the decade since the financial crisis, reflecting negative 'real' interest rates that meant holders lost money after inflation. Now, cash is competitive again following rate increases that have pushed real, inflation-adjusted rates into positive territory, and have brought bond yields into line with stock-dividend yields." Meanwhile, Morningstar also comments on money markets in their piece, "Investors, We Need to Talk About Your Cash." They explain, "Just a few short years ago, many investors were feeling lackadaisical about their cash holdings, and it was hard to blame them: Yields on most cash products fell somewhere between zero and abysmal. But now that the Federal Reserve has been lifting short-term rates for several years running, cash yields have begun to compel again -- at least relative to other investment types. Many money market mutual funds are yielding well over 2% these days, while longer-term CD yields are closing in on or over the 3% mark. When you consider the kind of volatility that both stock and bond investors were forced to endure in 2018, it's little wonder that many investors yanked dollars from long-term mutual funds toward the end of last year and steered the money to cash instead." The article recommends "right-sizing cash holdings," warns about holding too much cash or holding more than needed in low-yielding accounts, and urges folks to shop around for higher payouts.
