Investors sink a record $4.6 trillion into money-market funds to ride out pandemic uncertainty

• Cash in money-market funds reached $4.6 trillion recently, The Wall Street Journal reported Tuesday, as investors wait for market volatility to die down and the US economy to stabilize.
• The sum is the highest on record going back to 1992. It also leaves out other cash-like assets like bank deposits and short-term commercial paper.
• The inflows to money-market funds send a mixed message to experts. While the holdings leave plenty of ammunition for investors to deploy in riskier markets, the increase also arrives amid fears that major stock indexes are overextended.
• The stock market's rotation into riskier value names was "amplified" by a surge in retail trading activity, Goldman Sachs said Friday, suggesting Main Street investors are moving into equities while institutional players stay put in cash-like assets.
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Investors sprinted to money-market funds throughout the coronavirus pandemic as volatility ticked higher and experts warned of a longer-than-expected recession.

Total assets in such funds reached $4.6 trillion recently, The Wall Street Journal reported Tuesday, citing data from Refinitiv Lipper. The sum is the highest on record going back to 1992, detailing a broad rush to safe havens to wait out the public health crisis. Money-market funds are just one example of a cash-like asset, with plenty of other outlets available for investors seeking stable stores of value.

The inflows send a mixed message to experts. On one hand, record cash in money markets leaves plenty of ammo for investors to eventually deploy in riskier markets. On the other, the S&P 500 turned year-to-date positive just last week before plummeting on renewed virus fears. Some experts feared the index retraced its losses too quickly amid a revival of risk-on attitudes.

Read more: Famed investor Jim Rogers earned a 4,200% return with George Soros. He explains why the US response to COVID-19 is 'embarrassing' — and breaks down 4 purchases he's made amid the fallout.

The rush to cash-like assets began in February, when markets first tumbled on coronavirus fears. Investors piled into money-market funds and Treasurys and indiscriminately dumped stock and corporate bond positions. The Federal Reserve's move into corporate-credit markets set a backstop for risk assets and fueled their rebound through April and May. The latest data on money-market fund holdings set up two warring factions: investors hoping for a V-shaped economic bounce and those preparing for a more dour reality.

It's likely the split is formed along the border between retail and institutional investors. Goldman Sachs said in a Friday note that Main Street investors have trounced professional stock-pickers and hedge funds since markets bottomed in late March. Much of the market's rotation into riskier value stocks was "amplified" by a surge in retail trading activity, the team led by David Kostin wrote.

The data suggests most buying activity involved casual investors, and that institutional investors continue to hold cash on the sideline until new data points to a stabilizing economy.

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