Cash has been king since the Federal Reserve began its fight against inflation, while stocks have taken a dive. Now, the appeal of cash is fading away, and a select group stocks looks more interesting.
People have rushed so much into cash-like investments that their portfolios have become bloated with them. About 13% of the average Bank of America private-client portfolio comprises cash right now, up from around 10% in early 2022. Historically, cash as a share of investors’ holdings has tended to decline when it gets this high.
The point is that because people already own tons of cash and less stock, a reversal seems in store. That is partly because, as interest on the cash pours in, investors have to decide what to do with that money, and given the outlook for monetary policy, stocks could be the way to go.