October 7, 2022

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It has been a tough year for investors who have had to deal with volatile markets, skyrocketing inflation and rising interest rates.

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Stocks have just finished one of their worst weeks in recent months, with the Dow, S&P and Nasdaq posting their fourth losing week in five.

All three major US stock indexes fell to levels unchanged since mid-July, and the S&P 500 closed below 3900, a closely watched support level.

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The S&P 500 is down 4.8% last week and 18.7% this year.

The S&P 500 fell 4.8% last week and is down 18.7% this year.

The cry of the rally has turned into “Cash rules” as some investors seek refuge in cash as they capitalize on higher interest rates and wait to buy stocks and bonds at lower prices.

The Federal Reserve shocked the markets by raising interest rates sharply to contain the highest inflation in 40 years.

Higher rates lead to better rates for money market funds.

This has made cash the best way to hide from volatility, although it doesn’t buy much because of inflation.

Fund managers increased their average cash balances to 6.1% in September, the highest level in more than two decades, according to a survey by BofA Global Research.

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Assets in money market funds totaled $4.44 trillion last month, not far from a peak of $4.67 trillion in May 2020, according to Refinitiv Lipper.

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The Fed will meet again next week and another big rate hike is expected after this week’s CPI report was hotter than expected.

Federal Reserve Building in Washington, D.C.

According to the Crane 100 Money Fund Index, taxable money market funds have returned 0.4% this year as of the end of August.

The average return on the Crane index is 2.08%, up from 0.02% at the beginning of the year and the highest level since July 2019.

However, there can be downsides to cash, such as the ability to miss out on a sudden reversal that will lift stock and bond prices.

Reuters contributed to this report.