Dear clients,
Investors are accumulating cash at the fastest pace since the start of the pandemic, nervous about bank runs, trying to get higher interest rates in money market funds.
According to strategists at Bank of America Corp. Investors pumped $508 billion in cash in the first quarter, citing data from EPFR Global, their biggest quarterly inflow since the early days of Covid-19 three years ago. More than $100 billion has flowed into money market funds in the past two weeks alone.
The banking panic that led to the collapse of Silicon Valley Bank and other smaller lenders, as well as UBS AG’s surprise bailout of Credit Suisse Group AG early last month, added to concerns about the health of the banking system and fueled risk aversion and investor interest in liquid assets. The 16-year high in interest rates contributed to the flow of funds into money market funds from traditional deposits.
Earlier last week, Bank of America said cash was an „attractive alternative“ to stocks until the economic outlook stabilizes. The stock allocation is currently dominated by tech companies, posting a sixth consecutive week of gains, marking the sector’s biggest win streak in nearly a year.
Investors have flocked to tech stocks, believing that the peak rates are almost over, and are looking at companies like Apple Inc., Amazon.com Inc. and Microsoft Corp. as a haven from banking stresses, which caused a sharp drop in financials in March. An appetite for technology sent the Nasdaq 100 into a new bull market, with the index closing 20% above the December 28 close low on Wednesday.
