PIMCO: Be Conscious of Your Cash
AssetTV published a video entitled, "Straight from PIMCO: Time to Be Conscious of Your Cash." It features PIMCO's Jerome Schneider, who explains, "Today's economic environment is one fraught with uncertainty, where being selective in risk taking will likely prove to be beneficial. Focusing on the defense is important, in fact, we've had over $800 billion year-to-date and over $2 trillion the past three years into money market funds as investors have grown more defensive. Although the Fed's policy response, really cutting rates as well as providing liquidity through its various programs has resulted in money market funds really being a safe haven, the cost to investors is growing. Money market funds currently yield about zero percent, just over, and as a result, it's going to have a dramatic impact on savers for the foreseeable future." He continues, "Interest rates are expected to remain depressed for years, versus the prior recovery periods we've seen. In fact, if you compare 2012 to 2015, another zero percent interest rate cycle, we see that the expectation for interest rates was actually going to be moving higher over the foreseeable future. Today, we see the exact opposite, with interest rates remaining at or low near zero for the foreseeable future. Truly a secular phenomenon that we’re going to have to contend with." Schneider explains, "It's time for investors to be conscious with their cash. A broader opportunity set affords potential for additional yields beyond money market funds for modest increase in risk. Investors can do better than those immediate liquidity solutions if they're time horizon is beyond a few weeks or even a few months, by stepping out of those restrictive money market funds and capturing the premiums that exist today, and will likely exist into the future." He adds, "At PIMCO we aim to benefit from these higher yields and these structural premiums, at the same time focusing on downside protection and most of all liquidity management and capital preservation. So, despite the zero rate environment that we're seeing at this point in time, clients should be focused on opportunities which are diverse enough, high in quality and most importantly, can actively adapt to the changing landscapes to help produce positive total returns over secular horizons."
