“Stocks are more expensive than cash,” Ed Clissold, chief US strategist at Ned Davis Research, said. “You really have to try to find companies that will grow quickly to justify owning a risky asset like stocks instead of just sitting in cash and collecting a risk-free 5.5 per cent.”P 500 5 per cent lower so far in September, putting the index on track for its worst monthly performance of 2023.
“If I can earn, say, 5.5 per cent in a risk-free investment, particularly if I believe that there’s going to be a lot of volatility in the stockmarket, heck yeah, absolutely,” David Spika, president and chief investment officer of GuideStone Capital Management, said. “The good news is there are options for investors – you don’t have to take the risk of the equity market – you can benefit from the yields we’re seeing in fixed income and money markets.
Given that backdrop, hedge funds are ramping up their bets against stocks, driving net leverage to the lowest levels since the depths of the pandemic. Meanwhile, a Goldman basket of the most-shorted stocks is down more than 11 per cent this month, handing bears a handsome profit. With the labour market still strong and inflation above the Fed’s target, policymakers forecast fewer rate cuts than previously anticipated at last week’s policy meeting. That should keep cash yields appealing for the foreseeable future, said Winnie Cisar, global head of credit strategy at CreditSights.
“So long as the Fed is at elevated rates, cash is king,” Ms Cisar said. “If you fully believe what the Fed is saying/telegraphing in its SEP and statements, then cash is going to be the likely big winner.”