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US Dollars

Cash is King

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.

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.

Please check with your financial advisor to ensure that you are aware of the risks associated with your investment strategy and commission costs before placing your trades. You should consider your personal financial circumstances before engaging in any trading activity.

Volatility in the market, trade volumes, and system availability may delay your account access and trade executions. Be aware that the past performance of a particular security or strategy does not guarantee future results or success.