WS Journal, P&I on New Value in Cash
The Wall Street Journal again writes about "cash" in "Wall Street Finds New Value in Cash as Global Fears Weigh on Markets." The article says, "Worries about the war in Ukraine, China's Covid-19 outbreak, a U.S. or European recession and surging global inflation are making a long-spurned asset increasingly popular with Wall Street's top money managers these days: cash. As stock and bond prices have retreated from records in the tumult of headlines, more asset managers said they are looking to move funds into low-risk, cash-like assets." It quotes BlackRock's Rick Rieder, who "said the world's largest asset manager is increasing cash holdings by more than 50% in many portfolios to a weighting that is 'much, much higher' than it had been in years past.... 'For now, one of the most attractive things you can do is have patience, and if you can get paid to have patience that's a pretty good place to be,' Mr. Rieder said." The piece strangely says, "Prime money-market funds' holdings in the Americas rose from just under $146 billion in February to $193 billion in March, their highest levels of the year, according to data from the Investment Company Institute. Many expect such holdings to keep rising as rates on money markets, short-term bonds and other cash-like investments climb with interest-rates set by the Federal Reserve." The Journal adds, "Bank of America is expecting the Federal Reserve to raise U.S. interest rates to 3% by early next year from their current level of 0.25% to 0.50%. That would produce a similar rate for cash-like assets such as money-market funds, which track short-dated Treasurys, high-quality investment-grade bonds and commercial paper. That rate would be more than double the current 1.4% dividend yield of the S&P 500. Even though rates are well below that today, fund managers said they are ready to move into cash. Bank of America's April survey of global asset managers showed cash holdings are near the highest level since April 2020, which was the aftermath of the Covid-driven market selloff, and cash is one of the survey's most popular trades. Gaurav Mallik, chief investment strategist and global head of client solutions at State Street Global Advisors, said portfolios at his firm are holding at least 50% more cash than they did at the beginning of the year, with increased focus on 'keeping dry powder' by holding cash and money-market funds. 'Cash is king right now in terms of the return you're getting,' Mr. Mallik said." Pensions & Investments also writes on cash in, "Money market funds get a look amid rising rates." They comment, "As the Federal Reserve embarks on an aggressive interest-rate hike program to fight high inflation, some fixed-income specialists anticipate traditional money market funds will provide greater yields than the near-zero rates they have had in recent years. With rising rates along with other new macroeconomic worries, ... and rising inflation and commodity prices, more institutional investors could be motivated to move deeper into money markets -- not just for their yield, but for their low-risk and low-volatility characteristics, said Peter Yi, Chicago-based director of short-duration fixed income and head of taxable credit research for Northern Trust Asset Management. 'The market is pricing in the equivalent of at least eight more rate hikes this year,' Mr. Yi said. 'This trend could make money markets more attractive to investors, to help them generate yield while maintaining liquidity and safety.'" P&I adds, "John H. Tobin, New York-based chief investment officer at Dreyfus Cash Investment Strategies, a division of BNY Mellon Investment Management with about $370 billion in assets under management, said that money market funds perform well amid rising rates since they are highly liquid instruments and 'capture the rate hikes' very quickly."
