Over the third quarter of 2021, US business leaders continued to build cash and short-term investment holdings but more slowly than in Q2, according to the latest quarterly survey of America’s senior
corporate treasury and finance executives conducted by the Association for Financial Professionals (AFP) and underwritten by Wells Fargo Asset Management.

The AFP’s latest corporate cash indicators (CCI) quarter-over-quarter index decreased 22 points to +21 in Q3 2021, and the year-over-year indicator also decreased by 24 points to +21; readings that suggest US
organisations have accumulated cash reserves at a gradual pace in both the past quarter and year. The results are based on 129 responses from senior treasury and finance professionals.

The AFP comments that most US organisations that increased cash holdings over the months of July, August and September did so primarily due to improved business performance, while others were looking to preserve cash to safeguard against any upcoming uncertainty.

Positive motives

In early July 2021, American financial professionals signalled they were looking to build cash reserves during Q3, as reported in the July 2021 CCI report. “They kept to their word, though they accumulated cash at a slightly higher rate than anticipated,” the latest report notes.

“A significant share of companies attributes the expected increase in cash holdings in the last three months of 2021 to improved business performance, with a few business leaders reporting they would be building cash at their companies as a defensive measure to safeguard against uncertainty. Those financial professionals whose organisations are expecting to decrease cash and short-term investments during the current quarter indicate their actions are driven by worsening business performance and some attribute this to investments to strategically grow their business.”

Jim Kaitz, president and CEO of AFP commented: “The US economy continues to be facing various headwinds, ranging from the resurgence of the Covid-19 pandemic, severe supply chain issues, record
employee departures, roadblocks on Capitol Hill and more. It is no surprise that business leaders remain cautious when making investment decisions as they wait for a more stable environment.”

“We believe worries over the debt ceiling and mounting inflationary pressures could make it increasingly difficult for investors to confidently predict the future,” added Yeng Butler, Head of Investment Solutions and Liquidity Client Group, Wells Fargo Asset Management.

“We are seeing some investors continuing to assess cash and short-term investment holdings and overall balance sheet positioning in an attempt to safeguard against economic uncertainty. At the same time, many corporations have also benefitted from robust earnings. We are optimistic that improving business performance will continue to show momentum into 2022.”