There has been a lot of cash piling up in banks and money markets this year - a whole lot. Notable Number 1 in this week’s Weekly Market Review details that money market funds have increased by 1 trillion dollars (that is $1,000,000,000,000). My opinion on what is causing this is two-fold. First, the printing presses have been running hot. With all the stimulus created by the Federal Government this year, there is literally more money in the system than before. Second, many are stuck on the fence about what to do with their cash or excess savings. Corporations and individuals alike are paralyzed as to if they should save, spend, or invest the money.
- You could make a case for saving it based on all the uncertainly around COVID 19 and the political climate, after all, it is an election year.
- Sure, spending the money would be easy and could be fun too, but not sure that is prudent given the uncertainties mentioned above.
- Investing it for the future is something most recognize we need to do more of, but stocks as a whole, aren’t exactly cheap right now and interest from banks and bonds is pitiful due to record low interest rates.
The right answer is circumstantial and specific to each person or company’s needs and facts. In many cases, the answer may not be an all or none decision, meaning a portion of the cash could be spent or invested. Certainly, risk tolerance and goals must be part of the decision equation also.
Our office can help you analyze this decision and also present options where your interest rate or expected investment return may be better than you think. Just like in every industry, there has been a lot of innovation in investments that give you both opportunity and protections. We are finding investments that offer some element of opportunity and protection to be worth consideration right now given all the uncertainty. If we can help you discern what is the most prudent allocation of excess or stale cash right now, please let us know.
As always, we hope you find this week’s Weekly Market Review both interesting and informative.
Trevor N. Coe, CFP®