State Street Global Advisors (SSGA) writes that "Cash Is Both Shield and Sword" in its latest "Q2 2025 Cash Outlook." Portfolio Strategist Will Goldthwait explains, "Throughout history, financial crises have repeatedly taught a crucial lesson: survival favors the cautious. In times of heightened economic uncertainty, the prudent course is often to hold more cash and wait for calmer markets. Cash not only provides liquidity and security during volatile periods, but also grants the flexibility to seize opportunities when asset prices eventually correct. Historically, those who maintained unleveraged positions and proactively de-risked their portfolios were the ones best positioned to endure market turmoil and emerge stronger on the other side."
He tells us, "Looking back at events like the Great Depression of the 1930s, the stagflation of the 1970s, the Dot-Com bubble burst in the early 2000s, and the global financial crisis of 2008, the pattern is consistent: overextended leverage and risky exposures led to catastrophic losses. Meanwhile, investors and institutions that preserved capital and avoided excessive risk were not only able to withstand the storm but also capitalize on the recovery by deploying cash at distressed valuations. Warren Buffett famously emphasized this approach, maintaining that cash is not just a poor investment in good times but a valuable option in bad times."
Goldthwait continues, "Today, similar caution is warranted. The current administration's aggressive stance on tariffs, particularly its intent to impose levies on all imports, injects a significant layer of uncertainty into the global economic outlook. However, it is important to recognize that today’s economy is fundamentally different from that of the 1930s, making it unclear whether tariffs will have the same damaging effects as they did during the Great Depression."
He says, "The global financial system is far more integrated, and both monetary and fiscal tools are more sophisticated and responsive. Furthermore, there is an unprecedented amount of cash and liquidity standing by in the system, which could serve as a powerful buffer if the economy begins to falter. Massive liquidity injections in recent years, combined with more proactive central banks, could mitigate the worst potential outcomes of policy missteps."
SSGA adds, "In such an environment -- marked by geopolitical tensions, unpredictable policy shifts, and elevated market volatility -- cash serves as both a shield and a sword. It cushions against downside risk while preserving optionality for future investments under more favorable conditions. Until there is greater clarity on policy direction and macroeconomic stability, exercising patience and prudence remains the wisest strategy. History has shown time and again that it is the cautious, the unlevered, and the de-risked who ultimately endure -- and prevail."
In other news, ICI's latest "Money Market Fund Assets" report shows money fund assets falling $25.4 billion to $7.006 trillion, after rising $17.6 billion the week prior (and hitting a record) and rising $11.8 billion two weeks ago. Money fund assets have risen in 24 of the last 36, and 35 of the last 51 weeks, increasing by $702.7 billion (or 11.1%) since the Fed cut on 9/18/24 and increasing by $1.029 trillion (or 17.2%) since 4/24/24. MMF assets are up by $926 billion, or 15.2%, in the past 52 weeks (through 4/9/25), with Institutional MMFs up $465 billion, or 12.7% and Retail MMFs up $461 billion, or 19.1%. Year-to-date, MMF assets are up by $156 billion, or 2.3%, with Institutional MMFs up $14 billion, or 0.3% and Retail MMFs up $142 billion, or 5.2%.
ICI's weekly release says, "Total money market fund assets decreased by $25.40 billion to $7.01 trillion for the week ended Wednesday, April 9... Among taxable money market funds, government funds decreased by $9.22 billion and prime funds decreased by $13.68 billion. Tax-exempt money market funds decreased by $2.50 billion.” ICI's stats show Institutional MMFs decreasing $17.9 billion and Retail MMFs decreasing $7.5 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.743 trillion (82.0% of all money funds), while Total Prime MMFs were $1.129 trillion (16.1%). Tax Exempt MMFs totaled $134.9 billion (1.9%).
It explains, "Assets of retail money market funds decreased by $7.50 billion to $2.88 trillion. Among retail funds, government money market fund assets increased by $1.51 billion to $1.83 trillion, prime money market fund assets decreased by $7.22 billion to $922.62 billion, and tax-exempt fund assets decreased by $1.79 billion to $123.80 billion." Retail assets account for well over a third of total assets, or 41.1%, and Government Retail assets make up 63.6% of all Retail MMFs.
They add, "Assets of institutional money market funds decreased by $17.90 billion to $4.13 trillion. Among institutional funds, government money market fund assets decreased by $10.73 billion to $3.91 trillion, prime money market fund assets decreased by $6.46 billion to $206.05 billion, and tax-exempt fund assets decreased by $710 million to $11.12 billion." Institutional assets accounted for 58.9% of all MMF assets, with Government Institutional assets making up 94.7% of all institutional MMF totals.
According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $16.5 billion in April through 4/9/25, hitting a record high of $7.384 trillion on April 3. Assets rose by $2.8 trillion in March, $94.2 billion in February, $52.8 billion in January, $110.9 billion in December, $200.5 trillion in November, $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April 2024. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $330 billion lower than Crane's asset series.
Barron's comments on money fund assets in "Assets in Money-Market Funds Decline Even as Investors Seek Havens. Here’s Why." They write, "Assets in money-market funds fell slightly over the past week even as investors sought havens amid a turbulent stock market." They quote Robert Sabatino, head of Global Liquidity Portfolio Management at UBS Asset Management, "We're entering a cyclical period where money-market funds tend to lose some assets because of tax season."
The piece adds, "Given the high yield on money-market funds, they're likely to continue to attract more assets. And if the stock market continues to get pummeled, cash may be the one piece of investors' portfolios to generate a positive return in coming months."
