From the Wall Street Journal:
“The Federal Reserve reported Thursday that non-financial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest increase on records going back to 1952. Cash made up about 7% of all company assets including factories and financial investments, the highest level since 1963.”
The strongest balance sheet backdrop for Corporate America in nearly 50 years can only be a positive for the U.S. stock market. Extra cash for strategic mergers, share repurchases, and dividend payouts can help boost stock prices until businesses become confident enough to invest money back into their own asset bases. The latter likely won’t occur until some of the bearish headlines of recent weeks subside.
Among the important ones I would highlight, in order of potential resolution, would be the financial regulation bill going through Congress, the Goldman Sachs (NYSE:GS) fraud case brought by the SEC, and the Gulf of Mexico oil spill. Second quarter earnings will likely be quite strong, but the headline risk is trumping fundamentals for the time being.