In this torrid season of downtrends and declines, selloffs and stagflation, investors are reverting to the tried and trusted cash.
Amidst the plummeting stocks and bonds, the US Dollar Spot Index has upstaged all other assets this month. For 5 weeks, an exchange traded fund which trends Treasury bills became a cash cow thanks to investors and subsequently racked up the largest inflows experienced since 2020.
Capital Preservation is the order of the day, and investors are razor focused on achieving this. The investment climate is a rather gloomy one and amid that, there are several unfavourable conditions such as slowed economic growth, continual inflation and new covid lockdowns in China. Even commodities fell victim to Monday’s global selloff.
Deputy CIO for Richard Bernstein Advisors can lay claim to that very observation where cash has become the buffer for investors during times of uncertainty in the market. Cash is being obtained by selling stocks and bonds instead of bonds and cash. Consequently, there is an increase in the demand for cash.
Investment companies such as BlackRock Inc. confirms being somewhat of a tightwad when it comes to their cash, and that in order to hold firmly to said cash, they have been swapping bottom tier trades like junk bonds for top tiered ones such as high-ranking asset backed securities.
Tudor Investment Corp.’s CEO and CIO strongly advises against investing in stocks and bonds in favour of preserving capital.
The catalyst behind all of this is the 50 basis point rate rise by the Feds last week. This created uneasiness that the U.S economy might be teetering on the brink of stagflation- a concoction of slowed growth rates, rising inflation and declining employment.
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