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Recent data released by the U.S. Bureau of Economic Analysis (BEA) shows that total assets managed in U.S. Money Market accounts and funds have surpassed the $8 trillion threshold for the first time in history, indicating a significant shift in investor preferences towards high-yield and highly liquid assets amid a high-interest rate environment.
This growth was not limited to the size of the assets alone; the dividends paid by these funds witnessed a massive leap, reaching a record annual level of nearly $500 billion.
According to an analysis by the KobeissiLetter on platform X, the graphical analysis indicates that this amount represents approximately 2.5% of total annual consumer spending in the United States.
The analysis attributed this to the fact that following a series of increases in the benchmark interest rate by the Federal Reserve to combat inflation, money market funds have begun offering competitive returns that far exceed those offered by traditional bank accounts, attracting trillions of dollars to them.
On the other hand, investors have begun to lean towards transferring funds to money market funds, which are considered a relatively safe haven and low-risk alternative to stocks and long-term bonds during times of economic uncertainty.
Source: KobeissiLetter + U.S. Bureau of Economic Analysis (BEA)
