Investors Face a World Where Stocks No Longer Reign

The age-old mantra of ‘there is no alternative’ to stocks gets a stiff test as market losses mount, inflation accelerates and interest rates rise

Holding cash is incredibly popular with Wall Street today. This is a major sea change from the way professional asset managers have behaved over the last decade. WSJ’s Dion Rabouin explains why cash is no longer trash. Illustration: Adele MorganFor years after the 2008-09 financial crisis, interest rates were so low that many investors argued that to get a decent return, you had to put a hefty chunk of your portfolio in the stock market.

The Federal Reserve has turned that dynamic on its head. The central bank, determined to rein in inflation, has begun what could be its most aggressive campaign of interest-rate increases since the 1980s. Investors expect the Fed to bring rates to around 3% by early 2023 from near zero at the start of 2022. Once-loved stocks, as a result, have tumbled to multiyear lows.

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