Morgan Stanley’s sheet says holding capital in cash is a more attractive option for investors against US-based stocks and other instruments. Cash holdings appeared to be even more favorable than US Treasuries, Equites, and Credit showing the highest return within a 12-months time frame.
Cross-asset returns are getting lower across the globe. The drop resulted in tighter policies in the face of growing inflation and worsening economic data. Oppositely, cash yields have risen. As investors approach September, risky assets come with a deteriorating risk-reward rate.
At the same time, holding cash can be a good idea only from a short-term perspective. Growing inflation can reach its peak by winter reserving less space for individual investors to make their money work. Besides, the buying potential will also decline due to rapid product and service price growth. On the other hand, major assets will still come with enough liquidity.
Stock prices have shown an 18% increase between October 2017 and July 2019 even despite the balance-sheet runoff. Experts say the stock market still offers plenty of liquidity. What’s more, there is a good selection of stocks to buy and hold in 2022.
Nevertheless, most markets started the week with caution, while investors started receiving hawkish policy signals. Equity futures have dropped making cash investments not as exciting as many traders expect though still make sense depending on what the market is about to offer.