January 21, 2021
Corporate cash holdings in the second and third quarters of last year as the government quarantine basically caused the economy to stop dead in its tracks. Firms needed to raise money wherever they could to keep them going until such time as virus eased its grip and the economy returned to normal.
The ratio of corporate cash to assets peaked at 14.3% in the second quarter which is far higher than their long-run average of 10.0% (below). Corporations will begin to draw down those cash assets once the vaccine gets the virus under control and life returns to normal.