Money Market illustration

In the four weeks ending 26 January, the world’s money market funds took in $135 billion in new cash, the biggest haul since May 2020 when the funds bagged $175 billion as investors fled stocks and bonds when the COVID War set in, data service EFPR reported.

The funds are holding a record $5.18 trillion, edging past May 2020’s previous record of $5.16 trillion, EFPR said.

A money market fund is a mutual fund holding short-term debt, such as treasury notes, business loans, and some corporate bonds. Some consumers use them like bank accounts as places to store cash; some of the funds allow clients to write checks against their accounts.

Cautious investors have been stashing value in cash while they sit out recent lurches in stock and bond markets and wait for the U.S. Federal Reserve to throttle back its campaign of rate increases.

Also, wealthy individuals have been emptying bank accounts and moving their money to higher-yielding investments, as we detail in “The Rich Are Abandoning Bank Savings Accounts” in this issue.

From 1999 through 2021, $100 invested in stocks would have brought a 394-percent return, The Wall Street Journal noted.

In contrast, “throughout most of the last decade, cash earned you nothing,” Jimmy Chang, chief investment officer at the Rockefeller Global Family Office, told the WSJ. “There was a saying that ‘cash is trash’. Now cash is king.”

Money markets’ returns are averaging 4.42 percent this month, their heftiest yields since 2008 during the Great Recession, according to Crane Data. The Standard & Poor’s 500 index is returning 1.6 percent.

Some asset managers are storing their cash ahead of an anticipated rebound in bond and equity markets.

Meanwhile, “yield is being handed to us in the form of the safest asset in the world,” Joe Zappia, co-chief investment officer at LVW Advisors, said to the WSJ.

TREND FORECAST: Minus a wildcard event, such as a military conflict with Israel/U.S. vs. Iran in the Middle East and/or a heightened escalation of U.S./NATO/Ukraine vs. Russia, a major false flag event or nuclear exchange, we forecast more cash will be going into equities. However, if the wildcards are played, more cash will go into safe-haven assets, particularly gold.

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