Americans have been hoarding cash — even before the latest market turmoil
Assets in money market funds have been surging since 2022, hitting a record high last week.
Last week’s reciprocal tariff announcement has investors more jittery than at any point this year. Economists are raising the odds of a global recession, US and global stock indexes are tumbling, and oil prices have tanked. Instead of buying the dip, though, some investors and corporations are doing the opposite: hoarding cash.
According to The Wall Street Journal, assets in money market funds (MMFs) — near-cash assets that invest in short-term debt, offering a secure, modest yield — hit a record $7.4 trillion, per Crane data. Over $60 billion flowed in during just the first few days of April, as some investors sought safer ground.
However, the MMF asset boom started long before tariffs made headlines.
According to a different data set from ICI, money market fund assets have grown as much as 60% in the past five years, from $4.4 trillion to just over $7 trillion, as of April 2. Part of this surge comes down (of course) to safety, with MMF assets having spiked during the 2008 financial crisis, the early days of Covid, and after the Silicon Valley Bank collapse in early 2023.
But much of it is also about yield: since the Fed started hiking rates in 2022, MMFs have offered increasingly attractive returns, now averaging 4.2%, up from near-zero just a few years ago. Even with the Fed’s pivot, investors haven’t pulled out, with MMFs becoming more of a long-term allocation rather than “dry powder” sitting on the sidelines, waiting for the storm to pass.
