As the earnings season starts to wind down, investors have been mostly optimistic about what’s come out to date, which has helped to keep momentum in the stock market moving forward. As the next focus shifts to the Jackson Hole Fed Conference, all eyes will be on their comments regarding lowering the Fed Funds Rate.
Market conditions in the first half of 2025 have kept many investors cautious and on the sidelines. This prudent approach, while waiting for the tariff issues to resolve, inflation trends to decrease, and the budget to pass, among other factors, is in line with the current market conditions. A significant amount of these investor’s cash is currently held in money market funds, awaiting the optimal time to enter the market.
According to an article on MarketWatch, the Investment Company Institute estimates that $7.186 trillion of investor cash is sitting in US money-market funds (1 & 2), and households have over $20 trillion in cash and liquid assets available (2). These funds are ripe for supporting the stock and bond market as future conditions become clearer.
While the stock market has been touching new highs, the Muni bond market has seen very attractive levels, especially at the long end of the curve. With yields trading around 5% for high-quality paper, these bonds present an intriguing investment opportunity for safe, and respectable returns.
If rates are cut, it will be interesting to see these funds loosen up and start going to work in stocks and bonds again. In the meantime, tax-free bonds are worth a hard look.
1 article: MarketWatch by Joy Wiltermuth 8/18/25
2 haver.com Household Net Worth chart 4 and chart 7
