Are Nations Still Hunkering Down with Cash?
More than five years after Lehman Brothers become the most publicized victim of the credit meltdown, households around the world continue to seek safety from the financial system. When volatility and uncertainty hit, people often become overwhelmed with fear and shift their assets into cash to avoid additional pain. Stocks have rallied in recent years, but many people still prefer cold hard cash.
When it comes to asset allocation, cash is still king. According to a new analysis by the Associated Press, households in the biggest developed economies added $3.3 trillion to their cash holdings in the five years after the financial crisis. Meanwhile, the top 10 countries pulled $1.1 trillion from stock mutual finds during the same period, compared to $1.3 trillion of inflows for bond mutual funds.
Despite having one of the strongest stock markets in the world, Americans sold $521 billion, or 9 percent, of their mutual fund holdings, the highest amount of any country. Italians and the French sold a greater share of their holdings at 16 percent each, and Germans cashed out 13 percent of their holdings.