Cash is proving stickier than honey in a bear trap. Even as the Federal Reserve trims short-term rates, money market funds keep pulling in massive inflows — thumbing their nose at conventional investment logic. Peter G. Crane of Crane Data says they’ll “keep growing until their yield drops below 3%,” calling that level the point “when people start thinking about whether it’s time to move their money elsewhere.”

• Money market funds now hold roughly $7.8T in assets, with inflows projected to rise another $100B monthly through year-end, even as yields dip below the once-lucrative 5% range.
• Over the five years through September, they’ve returned 3% annually, compared to bonds’ negative 0.5%, driven by the 2022 inflation shock that sank bond values but fueled money market yields.

The exit strategy: Smart money recognizes this party won’t last forever. If economic conditions deteriorate and the Fed slashes rates dramatically — like it did in early 2020 — individual investors typically abandon ship quickly, especially since money market funds lack FDIC insurance protection that banks provide. As short-term rates begin their descent, locking in higher yields elsewhere might make sense for those willing to trade liquidity for longevity.