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Cash holdings among professional investors has edged up to 5.3 percent, compared to 5 percent in December, according to a Bank of America survey of asset managers with a collective $1 trillion under management.
That proportion of cash is the highest since May 2020, when the COVID War’s turmoil was gripping the global economy, the Financial Times noted.
Around the world, equity prices are down 6 percent this year, as measured by the MSCI World Index. Bloomberg’s index tracking corporate and government bonds has lost 3.5 percent so far in 2022.
As inflation gallops out of control, many investors are worried that the U.S. Federal Reserve will have to raise rates so much so quickly that the post-COVID economic recovery will be derailed or even thrown into recession, the FT said.
“The start of 2022 has been dominated by an unprecedented hawkish pivot across major developed market central banks,” Goldman Sachs analysts wrote in a note cited by the FT.
The bank advised clients to “overweight” cash in their portfolios and underweight corporate bonds, even though money-market funds and other cash accounts pay virtually no interest now.
Preserving capital has become more important than seeking returns.
“Once we have a clearer understanding of the interest rate path, that will reshuffle the deck,” Tancredi Cordero, founder of Kuros Associates, commented to the FT, and then investors can use their stored cash to snap up bargains among undervalued companies.
TREND FORECAST: We are not licensed financial advisors, therefore, we cannot provide financial advice. We provide extensive trends analyses, trend forecasts, facts and data in a vast variety of economic sectors… you make the decisions. The motto of the Trends Journal is “Think for Yourself.”
And, you may consider reading Gregory Mannarino’s article in this week’s Trends Journal, “The Power of a Balanced Hedged Portfolio.”