The Fed cut rates three times in 2025, and cash is still beating most savings accounts.
Money market fund assets just hit an all-time high of $7.75 trillion, with retail balances reaching a record $3.08 trillion. That is a lot of cash sitting on the sidelines collecting yield instead of chasing stocks.
The Investment Company Institute reported the new highs for the week ending May 13.
Government money market funds, which hold U.S. Treasury and government agency debt, now account for $6.27 trillion of the total. Prime funds (which include short-term corporate debt) hold another $1.23 trillion, while tax-exempt funds round out the rest at $141 billion.
Retail balances grew by less than $300 million on the week, but the trend is what matters, with ordinary investors choosing cash funds at a record pace.
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The reason for the pile-up is simple: short-term yields are still high.
Between mid-2023 and late 2024, the Fed kept its target rate between 5.25% and 5.50%, and yields on cash followed. Three rate cuts in 2025 brought those numbers down, but cash is still paying real money compared to where it was a few years ago.
Top money market accounts at banks now offer as much as 4.01% APY (TotalBank's online product), while Brilliant Bank, Zynlo, and Quontic are all paying between 3.80% and 4.00%. The FDIC's national average across all banks is 0.57%.
In English: an investor with cash in the right account is earning roughly seven times what a passive saver is.
Two products both use the words "money market," and the difference matters.
A money market fund - the kind tracked by the ICI - holds short-term debt and is not FDIC-insured, though it is treated as very low risk. A money market account is a bank deposit that is FDIC-insured up to $250,000, with check-writing or debit access in most cases.
Funds usually offer slightly higher yields, while accounts trade a bit of yield for federal insurance.
The point: both are paying real interest right now, which has not been true for most of the last 15 years.
The size of the pile is its own signal.
With $7.75 trillion parked in cash funds, investors are getting paid to wait, but a lot of that money could chase risk if yields fall further. Schwab's base case for 2026 is two to three more Fed cuts, which would pull short-term yields lower.
Where that cash goes next is one of the bigger questions for markets this year.
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