As it stands, 2022 has been the worst year for the markets since 2008, when the housing crisis was at its peak, and it felt like everything was collapsing. However, we aren’t going through a recession, or anything close to it. GDP has been rising for the past year and the labor market is improving increasingly, so what exactly is wrong? For one, a crisis we haven’t seen in decades is going on in Ukraine with Russia invading the country, which has caused ripples across the global economy. Additionally, inflation has surged to a 40 year high in the United States as supply chains have been battered by the pandemic and other global events.
As a result, money managers at Wall Street’s largest firms and institutions are starting to turn to cash holdings, which comes after a trend of heavy buying in the last few years. BlackRock, for example, is planning to increase their cash holdings by more than 50 percent citing interest rates as a cause for possible volatility in the next few months. The trend is now pointing this way, with money-market funds holding $193 billion in cash last month. A Bank of America survey this April found that most fund managers believe cash is the way to go, and this could have further impacts on the market. All of this selling volume could further scar the market and possibly send it into a bear market, which we haven’t seen since March of 2020. Although it seems counterintuitive to hold cash while inflation is soaring, the big players are going through with the hope that they can buy low in the future.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.