Corporate America puts $2 trillion in bank in run-up to election

Made stingy by the pandemic and gun-shy by the election, US 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 the data compiled by Goldman Sachs Group and Bloomberg. Firms with sturdier finances beat weaker ones by almost 20 percentage points.

It’s concerning when cash sits idle, particularly when the US is trying to pull out of a recession at a time when uncertainties around vaccines and who will be president remain high. With a new fiscal package stalled in Congress and the election race getting chaotic, the effect of tighter purse strings in Corporate America has the potential to go beyond the markets and become an economic story. 

“In an environment where things are changing and the markets are changing, it may be better to wait and see how things adjust first,” said Katy Kaminski, chief research strategist, AlphaSimplex Group.