Some investors estimate that more than $5 trillion in money market funds will someday return to the stock market. But there’s one reason Ned Davis Research has calculated that cash may stay in funds much longer than many expect, Business Insider writes.

Flows into money market funds have surged over the past year as investors seek to take advantage of high cash yields – above 4% – and they may not return to the stock market for a long time.

Over the past 13 weeks, funds have flowed into money market funds at the fastest pace since July 2020, driven in part by the collapse of regional U.S. banks such as Silicon Valley Bank and First Republic Bank.

When these funds eventually return to the stock market, asset prices will soar as risks decline and investor sentiment improves, and when liquidity floods the market, it can be confidently stated that investors are extremely pessimistic regarding risky assets. Analysts at Ned Davis Research explained that from a cash flow perspective, assets represent potential purchasing power as investors become risk-averse. But this time may be different: there is a difference between investors stashing money due to an uncertain macroeconomic situation and investors stashing money to take advantage of interest rates above 4%.

Those investors who sell stocks to buy money market funds and can at any time reverse their decision as soon as the situation becomes clearer is one thing, but people transferring funds from banks, where the yield does not reach 0.5%, into money funds markets offering a few percent more is another.

Therefore, high-yield money market funds could provide a bridge for investors, as the current risk-free yield of over 4% is more than half of the stock market’s average annual return of 7%.