Cash is king as money market funds hit record $7.8tn

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There’s an old saying in markets: when in doubt, hold cash. In 2025, that’s become more than a proverb. It’s the dominant investment strategy of the age.

US money market funds now hold a record $7.8 trillion, a sum that dwarfs the GDP of many major economies. After years of zero interest rates, cash has turned into a yield-bearing asset once again: safe, liquid and rewarding. From cautious savers to giant institutions, everyone seems to have rediscovered the comfort of holding short-term paper.

That same instinct is visible at the top. Warren Buffett, the world’s most famous value investor, is sitting on his largest cash reserves ever. Berkshire Hathaway’s restraint speaks volumes about today’s market mood: valuations are stretched, bargains scarce, and patience will eventually pay more than risk. Beneath this surface calm, the plumbing of the financial system is humming: the repo market, the quiet engine of overnight funding, has tripled in size, showing just how much short-term borrowing now underpins the system.

And yet, asset markets remain inflated. The Buffett Indicator shows US equities worth more than twice the size of the economy – a record even higher than the dot-com peak. At the same time, the country’s national debt has soared past 120% of GDP. America, in other words, is awash with cash and drowning in it at once.

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CHART 1 • Cash is king as money market funds hit record $7.8tn

Money market funds have quietly become one of the biggest stories in finance. As of September 2025, US assets parked in these ultra-safe funds hit a record $7.8 trillion – almost double the level seen before the pandemic. Fidelity alone manages over $1.6 trillion, followed by J.P. Morgan, Vanguard and BlackRock.

The surge began during the 2020 Covid shock, but accelerated as interest rates rose. For investors, money markets offered something rare in recent years – yield without risk. With the Federal Reserve keeping rates elevated, cash has become an income-generating asset class in its own right. The biggest asset managers have ridden that wave, tightening their grip on the short-term funding market.

If cash is once again the most attractive asset in town, what happens when rates finally fall and investors start reaching for risk?

Source: Econovisuals

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