WSJ Article Says Time to Hoard Cash
The Wall Street Journal writes "When Everything Is Expensive, Not Investing Is a Great Option." The piece, subtitled, "Stocks are at record highs and bond yields exceedingly low. It is time to hoard cash for the next buying opportunity," explains, "In a world where many markets look expensive, putting cash to work is hard. Simply hanging on to more of it might be a good idea. That is particularly the case after the first half of 2017 has delivered good results across the board. Most strikingly, both bonds and stocks are up. The MSCI World index of developed-market stocks is up 9.7% so far this year, while long-dated bonds are also partying, with the 30-year Treasury yield falling around 0.25 percentage point to just 2.73%, boosting prices. Corporate-bond yield spreads are back to their tightest levels since the global financial crisis." The Journal adds, "Yet falling bond yields and rising equity markets are sending conflicting signals: the former reflecting the lackluster picture for inflation; the latter hopes for growth. Bond yields are still ultralow, while equity valuations are high.... A divergence in either direction will mean that one of the asset classes will have to rethink its assumptions. The jury is out on what happens from here: hopes of a fiscal bump to growth led by the U.S. have faded, while the recent decline in oil prices may cause new worries about headline inflation. More significantly, perhaps, the flood of global central-bank liquidity that has supported markets is past its peak: the Federal Reserve is raising rates, and the European Central Bank is inching toward an exit from ultra-loose monetary policy.... `In this environment, faced with unappetizing initial valuations, not investing might be a valid strategy. For a long time central banks have sought to make cash as unattractive an asset as possible -- going so far as to introduce negative interest rates in Japan and Europe. But the more expensive financial assets like bonds and equities get, the less relatively expensive cash looks. The latest Bank of America Merrill Lynch global fund manager survey shows cash holdings at 5% of assets under management, above the 4.5% long-term average but lower than last year."
