The turmoil in the stock market has prompted institutional and retail investors alike to shift more of their investments into good-old cash, sending the total assets inside money market funds to their highest levels since early 2010.
According to the Investment Company Institute, assets in money market funds surpassed $3 trillion sometime in December. They rose further last week to $3.07 trillion in the week ended Jan. 9, after seeing a net inflow of $19 billion that week. That’s the highest level since March 2010.
A separate report from iMoneyNet said that assets held in money market funds have risen $159.53 billion in the past five weeks.
The increase in money market funds was accompanied by major outflows in exchange-traded funds, especially equity and bond ETFs. The ICI said that between Dec. 5 and Jan. 2, an estimated $60.5 billion flowed out of stock ETFs while another $48 billion flowed out of bond ETFs.
Cash is often seen as a safe haven during periods when stock and bond prices are declining. The S&P 500 Index fell 14.2% during the last three months of 2018 amid concerns of an economic slowdown. Signs that the Federal Reserve would keep lifting interest rates through 2019 added to concern about bond prices, which decline as interest rates rise.
Another factor prompting the shift to cash accounts is that, after three years of rate hikes by the Fed, interest rates are finally returning to levels where some investors believe they offer a modest return in the short term.
“Cash is attractive at today’s levels. Yields have come up a lot without taking on too much risks,” Collin Martin, director of fixed income with the Schwab Center for Financial Research in New York, told Reuters.