Cash is now Wall Street’s favorite four-letter word. Fund managers are piling into it at the fastest pace since Covid, with cash levels jumping to 4.3% in March — the biggest rise since 2020. The shift followed the US-Israeli strikes on Iran, which pushed oil above $100 and revived inflation fears. It’s a sharp reversal from January, when cash sat at a record-low 3.2%, and optimism was at its peak.

• Global markets are slipping, with Europe down ~5% and the S&P 500 ~2.6%, while rising bond yields limit safe havens.
• Investor sentiment has flipped sharply, with growth optimism dropping from ~40% to 7% and inflation expectations jumping from 9% to 45%.

The safety illusion: BlackRock analysts warn there are “few places to hide” from this near-term supply shock, while Robeco’s Michiel Plakman says investors are starting to price in a more prolonged conflict that could weigh on markets. Principal Asset Management’s Seema Shah adds that the war could compound existing pressures like private credit stress and AI uncertainty, potentially eroding the support that has been holding markets up. The foundation is being tested — and the cracks are starting to show.