Strategists are urging investors to allocate more of their portfolios to cash in these volatile times, as rising interest rates mean they now offer higher returns. “Cash was king” last month, Bank of America said in a Sept. 1 note, as most asset classes — such as stocks, bonds and even commodities — suffered losses. “Cash (now yielding 2.9%) was the only major asset class to gain (+0.2%), likely outpacing [consumer price index] again,” Bofa strategists wrote. For John Petrides, portfolio manager at Tocqueville Asset Management, “for the first time in a very long time, cash offers a competitive option against bonds and stocks when you’re worried about the near term. “The goal is to preserve capital because of this ‘very, very risky’ market environment,” added Eric Lonergan, macro fund manager at M&G Investments. He said his firm is shorting stocks and bonds, adding that hedge funds should be moving into cash. Read on. Wall Street professionals issue a stock warning. Here’s what they say to buy instead. These forward-thinking stocks may be safe bets right now — and analysts note serious upside. In fact, the efficiency of mutual funds contributed According to Goldman Sachs, this year the distribution of cash funds is higher. Earlier this year, mutual funds were allocating 1.5% of their portfolios to cash, the lowest level in at least 30 years, Goldman said in an Aug. 25 note. In June, however, ers fund managers increased their cash allocations faster than in any six-month period since the second half of 2008, and now have 2.4% of their portfolios in cash, or $208 billion. “Mutual funds increased their cash distributions this year at the fastest pace since the global financial crisis, fueling their outperformance,” Goldman analysts wrote. According to Morgan Stanley, not all cash is created equal. Among the highest-yielding options are six-month Treasury bills, which are yielding about 3.1%, their highest since 2007, according to Morgan Stanley. They “offer 157 b [basis points] more than the S&P 500’s dividend by 21 bp. more than 10-year US Treasuries and only 60 bp. less than the U.S. aggregate bond index,” strategist Andrew Sheets said Aug. 21. “For U.S. dollar investors, cash is no longer a significant impediment to current portfolio returns.” Petrides of Tocqueville Asset Management told CNBC that “if you’re cautious about the next 6-9 months in the economy and/or financial markets … 6-month T-bill [that] a yield of around 3% — in a tax-deferred account — seems like a reasonable asset allocation.” Morgan Stanley said holding the US dollar looks “relatively attractive” because it provides high current yields as well as liquidity.”[It] offers better 12-month total returns than our strategic forecasts for US equities, US Treasuries and [investment grade] or [high yield] credit (with much lower volatility),” the bank’s analysts noted. The dollar index, which measures the dollar against a basket of currencies, hit a new 20-year high on Monday. It’s up about 14% year-to-date. How long? If you’re interested in getting cash, how long should you use the ‘money is all the same’ strategy? Tech investor Paul Meeks told CNBC’s “Squawk Box” in late August that he’s made more money by more than 20% in some of his portfolios while he’s waiting for technology valuations to recede before returning to the sector. While Petrides said cash “works until the market changes.” feel comfortable owning long-term assets such as growth stocks or bonds with longer maturities,” he added. CNBC’s Sarah Min contributed to this report.
