Cash Rich

• Money market funds grew by $860 billion in the most recent year, following increases of $920 billion in 2024 and $1.2 trillion in 2023, driven by positive real yields
• New 2026 tax incentives including higher standard deductions and increased SALT caps could add more money to consumer wallets
• Homeowners hold $17.1 trillion in home equity as of Q3 2025, which could be tapped if mortgage rates fall and home prices continue rising

Summary: Cash on Sidelines Could Fuel Market Rally

Key Figures:

• Money market fund assets currently stand at $7.7 trillion, approximately one-tenth of the entire U.S. stock market
• Assets peaked at $7.8 trillion in early January 2026
• Inflows: $860 billion in the past year, $920 billion in 2024, and $1.2 trillion in 2023
• Homeowner equity totals $17.1 trillion as of Q3 2025

Main Insight:

Despite Federal Reserve interest rate cuts, investors continue accumulating cash in money market funds, attracted by positive real yields that exceed typical bank savings accounts. This sustained trend reflects a significant "cash war chest" remaining on the sidelines.

Market Implications:

Analysts suggest this massive cash reserve could soon flow into equities, driven by:

• 2026 tax incentives, including higher standard deductions and increased SALT caps, putting more money in consumers' wallets
• Potential home equity extraction as mortgage rates decline and property values rise
• Reduced uncertainty around Fed monetary policy

Outlook:

The combination of elevated cash holdings and forthcoming catalysts could trigger increased market participation. This redeployment of "dry powder" may support:

1. Stronger consumer spending, boosting economic growth
2. Greater equity market investment, potentially supporting stock prices
3. Overall market momentum as cash-rich investors increase risk exposure

The article positions this substantial cash stockpile as a bullish indicator for equities, suggesting significant upside potential once investor sentiment shifts from caution to deployment.