This chart shows the amount of assets currently held in money market funds, and you will note that we are at an all-time record of about $7.4 trillion.
I can think of several explanations for this amazing cash hoard. First, the economic uncertainty created by the Administration’s on again off again tariff policy may be pushing some investors toward the safety and liquidity of these funds. Second, investors may find the 4+% yield on money market funds attractive as compared to the essentially 0% rate that prevailed for several years. Moreover, most of the 4.3% yield on the 10 year U.S. Treasury bond is captured in money market funds without the need to extend maturity. Third, with stocks at or near all-time highs and extended valuations, those who attempt to time markets may be on the sidelines waiting for a better entry point. Finally, strong earnings have swelled the amount of cash on corporate balance sheets. Should some of the $7 trillion in money market funds find its way into U.S. stocks, the impact could be significant given that the overall market is currently valued at about $55 trillion!