Bloomberg: Wall of Cash Holding Firm
Bloomberg writes, "A $6 Trillion Wall of Cash Is Holding Firm as Fed Delays Cuts." It says, "Investors are plowing billions into money-market funds by the day. Corporate treasurers are hoarding record amounts of cash. The market is digesting a glut of Treasury bills without a hiccup. For an asset class that many market prognosticators all but left for dead to start the year, there's still plenty of life left in cash. Investors have added $128 billion to US money-market funds since the start of the year, Investment Company Institute data show. Companies were sitting on a record $4.4 trillion of cash at the end of the third quarter, and after a flood of more than $1 trillion of T-bills since mid-2023, the market has room for more. It's a stark contrast to just a couple of months ago, when one of the hottest questions on Wall Street was where investors would redeploy all their cash holdings once the Federal Reserve started cutting interest rates and making stockpiles of money less appealing." The article explains, "But a lot's changed since then. Traders have dramatically dialed back policy easing expectations, for one. The more time it takes the central bank to begin lowering its benchmark, the longer cash held in money-market funds should be able to earn 4%, 5% or more, keeping investors from looking further afield. Add to that corporate executives who seem in little rush to spend money following the pandemic and depositors still worried about the state of the banking system, and all signs point to 2024 being another big year for cash." They quote our Peter Crane, "The year of cash wasn't a flash in the pan.... The overall resensitization to interest rates is still spreading and even a lot of money hasn't moved or looked at it yet." Bloomberg writes, "Some corporations have already boosted their money-fund holdings. Meta Platforms Inc., the parent company of Facebook, increased its allocation to money funds to $32.9 billion at the end of the year from $29.6 billion as of end-September, according to filings with the Securities and Exchange Commission. Amazon.com Inc. had $39.2 billion in money funds at the end of 2023 from $20.4 billion the prior quarter. Meta and Amazon declined to comment. Qualcomm Inc., the world's biggest seller of smartphone processors, increased money-market fund holdings in 2023, while its cash and cash equivalents rose to $8.13 billion as of Dec. 24 from $4.88 billion a year earlier. 'For us, the cash balance is really strategic flexibility,' Akash Palkhiwala, chief financial and operating officer, said in an interview. 'We want to keep it liquid and we want to stay at the lower end of the risk profile. So if you look at our cash balance, a lot of it is invested in money-market funds.'" The piece adds, "Even with cuts on the horizon, cash isn't budging, according to Crane, who expects money fund holdings to reach $7 trillion this year, given unease about the banking system and the stack of uninsured deposits. 'I will eat my hat if money-market fund holdings were to decline from their current levels in 2024,' he said."
