Cash is becoming the king as investors flee volatile stock markets.
Assets in money market mutual funds have swollen to $3.066 trillion, their highest level since March 2010, driven by retail investors. The money fund assets had spent much of the last decade in the $2 trillion range but tracked above $3 trillion again in mid-December, coinciding with a late-2018 market downturn that resulted in the S&P 500 posting a 6.2 percent drop for the year, it’s worst showing in a decade.
Mom and pop investors “blinked,” said John Stoltzfus, the chief investment strategist at Oppenheimer who pointed to the trend in a note on Monday.
Sean Collins, the chief economist at Investment Company Institute, which tracks the data, said the move could reflect a combination of factors: Investors are wary about the stock market volatility, but higher short-term interest rates are also making money market funds more attractive for those who want a short-term asset. Money market funds have long been considered as safe as cash savings accounts at banks.
But Stoltzfus said the money flows more likely reflect the whim of skittish investors reacting to the markets on their own. Nearly three-quarters of the $183 billion that has flowed into money market funds since the end of the third quarter last year was to retail funds, not institutional, according to ICI data.