Once the Worst Yield on Wall Street, Cash Now Seems to Be the Best Asset to Own, According to Morgan Stanley

Equity sellers are poised to pick up where they left off on Friday as the market appears to wake up from its August slumber with a vengeance.

As Goldman Sach’s Chief U.S. Equity Strategist David Kostin told his clients after the S&P 500
SPX

took just 17 weeks to hit its year-end target of 4,300, “upside appears limited as downside risks loom”. His concern is that we could enter a 2000 trap, where the market declines even after hiking stops if the US enters a recession.

This brings us to our call of the day from Morgan Stanley strategist Andrew Sheets, who argues that investors should consider cash as a viable investment strategy, even though it hasn’t seemed like such a winning proposition in the past.

“Holding cash…has been an explicitly defensive decision for most of the past 12 years. Of course, it offered a worse return than anything else on the market,” Sheets told clients in the bank’s Sunday post. This strategy also proved costly, with the dollar underperforming both the S&P 500
SPX

and 10-year US treasury bill
BX:TMUBMUSD10Y

between 2010 and 2020 (except 2013 and 2018), he added.

Bloomberg, Morgan Stanley Research

“But the idea that holding cash means paying for insurance is no longer accurate,” said Sheets, who notes that 6-month U.S. Treasuries
BX:TMUBMUSD06M

yields (3.1%) are the highest since late 2007, offering 157 basis points more than S&P 500 dividends, 21 basis points more than 10-year Treasuries
BX:TMUBMUSD10Y,

and just 60 basis points below the US aggregate bond index
AGG.

“For USD investors, cash has ceased to be a major drag on a portfolio’s current performance,” he said. Even holding cash in Europe, which was once extremely expensive, is no longer so, as German bills at 6 months
BX: TMBMBDE-06M

returns are positive for the first time since 2014.

Streets said that on a multi-asset basis, US dollar cash offers high current yield, liquidity and a better 12-month total return than Morgan Stanley’s own implied forecast for US stocks, US Treasuries , investment grade and high yield credit -” with much less volatility.

That’s why Morgan Stanley’s core fixed-income portfolios are overweight in short-term fixed-income, he said. Against other currencies, the dollar is also holding up, and the bank’s currency experts see more of this strength coming, especially against the euro.
EURUSD,

which hit parity again on Monday as concerns about winter fuel shortages in Europe grow.

The market

Equity Futures
ES00

YM00

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slide south, with bond yields
BX:TMUBMUSD10Y

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reflecting a cautious mood and oil prices
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BRN00

under pressure. Investors continue to push the dollar
DXY

upper. Elsewhere it was a rough day in asia and European equities
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are under pressure.

The buzz

Among this week’s data and events we’ll have PMI numbers, second quarter GDP, the Fed’s favorite inflation gauge and the central bank meeting in Jackson Hole, with President Jerome Powell in front of his express Friday morning.

On the Rhythm of Memes, AMC Entertainment
CMA

tumble before the start of trading of preferred sharesor ApesL, and London-based Cineworld
UK: WHO

confirmed that it was given a bankruptcy filing in the United States. Stock in another meme, Bed Bath & Beyond
BBBY,

is also down.

CEO Elon Musk said the Tesla
TSLA

will be raise the price of its “Full Self-Driving” feature to $15,000.

Join CVS
SVC,

Amazon
AMZN

is apparently among the bidders for healthcare company Signify Health
SGFY.

central bank of china reduce your prime lending rate, a move aimed at boosting its faltering real estate market. Meanwhile, power rationing in the drought-stricken southwest, affecting industrial companies and Tesla in Shanghai, has been extended.

Retail and tech names to report this week, with Zoom Video
ZM

and networks of Palo Alto
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due after Monday’s closing. Macy’s
M,

Dick Sporting Goods
SDKs,

dollar tree
LTRD

and General Dollar
CEO,

Platoon
PTON,

Nvidia
NVDA,

Selling power
RCMP

and Marvell
MURLY

among other highlights.

A group of Apple
AAPL

the workers have reportedly pushed back a back-to-office order for next month.

Fans are rushing to watch HBO’s ‘Game of Thrones’ prequel ‘House of the Dragon,’ which has a $100 million market campaign behind it, sent the app crashing.

The best of the web

As war nears six months, top Russian diplomat warns of long conflict ahead

Americans see a threat to democracy as the No. 1 problem, new poll finds

Crypto geniuses who vaporized a trillion dollars.

Table

RBC Capital’s head of US equity strategy, Lori Calvasina, says stocks can and have hit major lows even amid falling earnings forecasts, with her chart below showing those moments in history. While Calvasina remains concerned that likely further dips for 2022 and 2023 EPS forecasts could make the stock market more volatile, she doesn’t think it will lead to a new low for stocks.

RBC US Equity Strategy, S&P Capital IQ/ClariFI, CIQ estimates

Best Tickers

Here are the most searched tickers on MarketWatch as of 6 a.m. EST:

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AMC Entertainment

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Bed bath and beyond

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GameStop

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GigaCloud Technology

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Apple

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international endo

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best buy

Random plays

“I don’t want to be part of a slow decline. Why a 3-star Michelin chef quits

You have to fight for your right enjoy.

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