🚨 $7 TRILLION IN CASH: Why Are Investors Ditching Risk Assets? 🚨

In a dramatic turn for global markets, a staggering $7 trillion is sitting idly in money market funds, as investors shun riskier assets. According to Reuters, this is a new record high, signaling unprecedented caution amid economic uncertainty. Despite the Federal Reserve’s recent rate cuts, investors are opting for safer, short-term debt securities like U.S. Treasuries.

Key Insights Behind the $7 Trillion Cash Hoard

Money Market Funds: A Safe Haven
Money market funds (MMFs), offering lower-risk investments, have become the go-to destination for sidelined cash. Since 2022, investors have poured into these funds as the Fed aggressively raised interest rates, pushing yields higher. Even as rates decline, the trend shows no signs of slowing.

Uncertainty Reigns
Bank of America strategists suggest that market sentiment is far from "normal." Treasury yields have remained below the Fed funds rate for two years, further amplifying investor caution.

When Will the Outflows Begin?
Historically, money market funds see outflows roughly one year after the Fed’s first rate cut. If history repeats, September 2025 could mark the turning point, unleashing a potential flood of capital back into riskier markets.

Why Are Investors Avoiding Risk?

Economic Uncertainty: Concerns over global market stability and inflation persist, even as interest rates ease.Attractive Yields: MMFs continue to offer competitive returns with minimal risk, making them a preferred choice for capital preservation.Delayed Recovery: Despite improving conditions, many investors remain hesitant to re-enter equities or other volatile assets.

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