The amount of cash, bank deposits, and money-market funds ($8.85 trillion) is equal to 74 percent of the market value of U.S. companies, according to this Bloomberg article. The cash-to-stock market value ratio is the highest it’s been since 1990, according to Federal Reserve data compiled by Leuthold Group and Bloomberg. This huge cash hoard has made some professionals, including Eric Bjorgen of the Leuthold Group, more positive about equities. “There is a store of cash out there that is able to take the market higher,” said Bjorgen. “The same dollar you had last year buys you twice as much S&P 500 as it did a year ago.” In its December 2008 investor bulletin, the Leuthold Group wrote how stocks are offering investors “one of the great buying opportunities of your lifetime.”

According to Bloomberg, “Cash holdings peaked one month before equities began to recover during the two longest recessions since World War II. In July 1982, money of zero maturity as a percentage of the U.S. stock market’s value rose to 95 percent before a 20-month bear market ended and the S&P 500 began a six-month, 36 percent advance, data compiled by Bloomberg show. In September 1974, cash on hand reached $604.5 billion, representing a record 1.21 times U.S. stock capitalization. That preceded a 31 percent gain in equities between October 1974 and March 1975, Bloomberg data show.”

Neil Hennessy, president of Hennessy Advisors, says that “once the money starts to come back into the market, buying is going to beget more buying. People don’t want to be left behind.”