Made stingy by the pandemic and gun-shy by the election, U.S. companies have reconsidered spending plans on everything from shareholders to factories. As a result, cash is pooling on balance sheets, swelling rainy day funds to an unprecedented $2 trillion.
While analysts have a million ways to spend it, the market’s preference is clear: don’t. Doing so has been bad for your stock. Companies laying out the most for share repurchases and capital investments have trailed the S&P 500 since its March low, according to data compiled by Goldman Sachs Group Inc. and Bloomberg. Over that stretch, firms with sturdier finances beat weaker ones by almost 20 percentage points.
The pandemic first, election second I would think. So there s a pile of cash at the short end of the markets until Q2 2021 at least. I would expect to see reserve balances pile up. The Fed likely to respond with more asset purchases. It is a tax battle, the Fed is, in essence, searching for taxable yield. The force results in more taxes on duration rather than rising interest charges. The Fed is supporting the Treasury duration insurance, keeping Congress liquid.
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