When Cash Delivers Better Returns Than Stocks
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Here's your Money Briefing for Thursday, January 26th. I'm J.R. Whelan for The Wall Street Journal. The topsy-turvy stock market movements we've seen over most of 2022 have extended into 2023. That's made even the most seasoned investors a little jittery about buying stocks. So they've revisited an old standby in uncertain times.
Cash in times like this actually ends up becoming one of the top performers. That's a really big thing for investors because, yeah, sure, you're not making any more money than you're losing, but it's helping to sort of tamp down those losses.
Coming up, we'll talk to Wall Street Journal markets reporter Hardika Singh about how individual investors can join in the dash for cash and not take a beating in a volatile stock market. That's after the break.
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Why are investors piling into cash and money-market funds in early 2023?
The wild up and down swings we've seen in the stock market over the past 12 months are enough to cause some investors to think twice before buying more stocks. So they've kept their money on the sidelines and invested in cash, where they can often score returns better than with stocks. So how does that work? And how can you, the individual investor, do the same? Wall Street Journal markets reporter Hardika Singh joins us with more. Hey, Hardika, thank you so much for being with us.
Thank you so much for having me.
So Hartika, I want to ask you about ways to invest in cash in a moment, but big picture for a second. To what degree have investors turned their attention to cash?
Cash is a really big deal in markets right now. Investors have added about $135 billion to global money market funds over the past four weeks. And that's according to data through January 18. That makes it the best stretch since the four-week period ending May 2020 when those funds had locked $175 billion in net inflows.
Wow, $135 billion in just a four-week period?
Yeah, it's insane. It's just absolutely insane how investors are piling into cash.
All right, so help us understand the money trail here. Where are investors moving that money from?
So last year was a difficult one for a lot of investors. Stocks didn't do well. Bonds, which are considered to be ultra safe, your money is going to be safe if you invest in bonds, also suffered a lot. Oil prices were volatile. Commodities kept going up and down. It wasn't really clear. So it seems like investors this year haven't trusted the rally we've seen so far in stocks and bonds. So they're moving money out of those equity markets and putting it toward cash instead.
So you mentioned that's the most cash added to money market funds since May of 2020. That was a pretty rocky stretch for stocks. You know, when the onset of the pandemic was spooking the markets. Now, I'm almost afraid to ask this, but what are investors expecting from this market to cause them to load up on cash so much?
So obviously, like when we saw this trend happen in 2020, in some ways, it seems like it was much bigger deal, right? Because there was just so much uncertainty about what was going to happen to not just markets, but a lot of other areas of the economy.
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