Maximizing risk-adjusted returns: Investors should focus on maximizing risk-adjusted returns, considering their individual risk tolerance and investment goals, rather than solely on expected returns or wealth.
Investors should focus on maximizing risk-adjusted returns rather than expected returns or wealth. The discussion on the podcast "Unhedged" from the Financial Times and Pushkin, hosted by Ethan Wu and featuring markets columnist Katie Martin, emphasized the importance of considering the opportunity cost of holding cash in the current market environment. With interest rates cutting being the dominant expectation, cash may become less attractive. However, investors should be cautious not to fall into the trap of maximizing expected value and instead consider their individual risk tolerance and investment goals. For those with significant wealth in money market funds, like the host of the show, it's essential to consider alternative investment opportunities that align with their risk profile and long-term financial objectives. It's crucial to remember that every investment comes with its own set of risks and potential rewards. Therefore, a well-diversified portfolio that considers an investor's risk tolerance and investment horizon is key to achieving long-term financial success.
Cash as an Investment: A Trend of Changing Value: Interest rates significantly impact the value of cash as an investment, causing shifts in investor behavior and massive influxes into money market accounts when cash offers higher yields than riskier investments.
The value and appeal of cash as an investment can fluctuate significantly depending on interest rates. A few years ago, cash was considered a poor investment as it paid little to no interest. However, when interest rates rose, cash became an attractive option, offering higher yields than riskier investments. This shift led to a massive influx of funds into money market accounts, making them a popular investment choice. With over $6 trillion currently in money market funds, it's clear that many investors have followed this trend. Previously, the low yields on these accounts made them an unappealing option, but now, they offer competitive returns and provide a safe and accessible investment option.
Cash inflows surge in low-interest rate environment: Investors faced a dilemma: stay in cash with falling rates or move funds into stocks/bonds, historically stocks have outperformed cash and bonds but market uncertainty can be intimidating, consider financial goals, risk tolerance, and market outlook before making significant moves.
The low-interest rate environment for savings accounts, like money markets, has led to a massive influx of funds away from stocks and bonds and into cash. This trend was particularly evident in 2020 when money market funds saw trillion-dollar inflows, surpassing those of US equity funds or bonds. However, the high returns seen in the stock market last year could have resulted in even greater gains for investors had they not been overly cautious and held onto their cash. Now, investors are faced with a dilemma: should they stay in cash with falling interest rates or move their funds into stocks or bonds? While the decision may depend on individual risk tolerance and investment goals, historical data suggests that stocks have outperformed cash and bonds over the long term in the US market. Yet, the uncertainty and volatility of the stock market can be intimidating for some investors. Ultimately, it's essential for investors to weigh their options carefully and consider their financial goals, risk tolerance, and market outlook before making any significant moves. The decision to stay in cash or invest in stocks and bonds should be based on a well-thought-out strategy rather than fear or greed.
Wall Street Analysts Recommend Reducing Cash Allocations: Analysts suggest reducing cash holdings for better investment opportunities, but maintaining some reserves for emergencies is crucial.
Despite the appeal of keeping cash reserves for unexpected expenses or investment opportunities, many Wall Street analysts recommend reducing cash allocations in the coming year. While cash offers a stable yield and a sense of security, it also requires active management and the risk of missing out on potential market gains. The emotional appeal of cash, as noted by some investors, can lead to a false sense of security and hinder growth opportunities. Large institutions are already reducing their cash holdings, indicating a shift towards more aggressive investment strategies. However, it's essential to strike a balance and maintain some cash reserves for emergencies. The key is to carefully consider the opportunity cost of holding cash and weigh it against the potential rewards of investing in other assets.
Anticipated shift from cash to stocks in 2023: Investors are expected to move cash to stocks in 2023 due to potential buying opportunities and significant cash accumulation, which could lead to substantial price increases for various assets.
Despite the strong performance of cash in the previous year, investors are expected to move their funds out of it and allocate them to other asset classes like stocks in 2023. This anticipated shift, often referred to as a "great rotation," is due to the significant amount of cash that has accumulated on the sidelines, and the potential for buying opportunities in the equity market if prices dip. This trend could lead to substantial price increases for various assets. However, the decision to invest or keep cash depends on individual risk tolerance and investment strategies. Some investors may prefer to keep their cash due to market uncertainty, while others may see the current situation as an opportunity to enter the market. Ultimately, the movement of cash from low-risk assets to higher-risk ones could significantly impact asset prices.
Staying informed for investment opportunities: Consider bond funds for potential yields and capital gains amidst market uncertainty, but remember all investments carry risks. Stay informed and make decisions based on individual beliefs and market conditions.
Despite the uncertainty in the markets, there are opportunities to be found. Some investors may consider investing in bond funds to capitalize on potential yields and capital gains as interest rates decrease. However, it's important to note that all investments come with risks, and individuals should not consider this as investment advice. During the show, the hosts discussed their investment preferences, with one being "long" on a dedicated supporter of a Taiwanese political candidate, Ko Onje, who went against the norm by having his candidate's face shaved on the back of his head. The other host expressed being "short" on The Magnificent 7, without elaborating on the reason behind this investment decision. Overall, the discussion highlights the importance of staying informed and making informed investment decisions based on individual beliefs and market conditions. PGIM, a leading global asset manager, offers deep expertise and resources to help investors navigate the challenges of today and pursue their long-term investment goals.
Cautious Outlook on US Tech Stocks: Some experts advise that US tech stocks may underperform the broader market, but this is not a guarantee and investors should make informed decisions based on thorough research
Some experts believe that high-flying tech stocks in the US, which have dominated global markets for over a year, may underperform the rest of the market. This is not a prediction of a total collapse, but rather a cautious outlook. This viewpoint was expressed on a recent episode of Unhedged, and it has influenced some investors to take a contrarian stance and bet against these stocks. However, it's important to note that nobody can predict the future with certainty, and this is just one perspective. Listeners are encouraged to make their own informed decisions based on thorough research and analysis. Unhedged is a podcast produced by Jake Harper and edited by Brian Erstat, with contributions from Robert Armstrong, Alastair Mackey, Greta Cohn, and Natalie Sadler, among others. The show is available to Feet premium subscribers for free, and a 30-day free trial is available to everyone else. Just go to ft.com/unhedged to sign up. I'm Ethan Wu, and thank you for listening.
Cash Rethink Energises Asset Markets
Recent Episodes from Unhedged
Federal Reserve puts on enormous party hat
In a massive surprise on Wednesday, one of Rob Armstrong’s predictions turned out to be right. The Fed did indeed cut interest rates by half a percentage point. A cut this big is deeply unusual, and normally happens in a crisis. But there are a lot of reasons to think we’re not in a crisis at all. Today on the show, Katie Martin and Rob Armstrong talk about what the Fed just did, and where the central bank is headed. Also, we go long European merger drama and short well-being at big banks.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Hosted on Acast. See acast.com/privacy for more information.
What is Apollo, anyway?
Apollo Global Management is publicly traded and one of the largest alternative asset managers in the world. But what does it really do? Today on the show, Rob Armstrong asks reporters Sujeet Indap and Eric Platt to describe the parts that make up Apollo. Also they go long Boeing and long News Corp.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
How Ireland got too much money
Forty years ago Ireland had a high number of emigrants and very few multinational corporations. Then it became a tax haven. Today, the country is the headquarters for the European arms of companies such as Apple, Google and Intel. The country also has an €8bn surplus, and is about to get €13bn more following a court ruling with the iPhone maker. Today on the show, Katie Martin and Irish economist David McWilliams try to figure out what Ireland should do with all this extra cash. Also they go short Trump Media and long the Netflix series, The Perfect Couple.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
The Fed: will it be 25 or 50?
Will the US central bank lower interest rates by 25 or 50 basis points? Fed chair Jay Powell has hinted rates are coming down, but not by how much. Today on the show, Katie Martin and Rob Armstrong take sides and argue the case for the expected 25 basis point cut, and a larger 50 basis point cut. Also we short Apple’s new phone, and go long the amazing technology of the veterinarian.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
How to fix the housing market
By many measures, the US housing market is broken. High demand is causing high prices, and yet, year after year, new supply fails to arrive. What’s behind the mismatch? And is there any way to solve it? Today on the show, Robert Armstrong and Aiden Reiter discuss proposals from the two US presidential candidates, and other ideas. Also, we go short Turkey and short the yield curve.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
Boring but sexy (stocks)
The run-up in the markets over the past year or so has been largely driven by tech companies with outsized returns. But that seems to be changing. Names such as Walmart, Berkshire Hathaway and UnitedHealthCare have been performing strongly while the once-hot tech sector seems to lag. Today on the show, Katie Martin and Rob Armstrong ask if this is a sign of an era shift in the market. Also we ask if Jerome Powell was lucky or good.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
The ethics of investing for dictators
Toby Nangle is a regular contributor to the FT. Before he was a journalist, he was an asset manager for more than 25 years, and many of his clients were sovereign wealth funds. And some of the sovereigns of those wealth funds were doing things that made Nangle uncomfortable. So he quit. Today on the show, we discuss a massive problem faced by the investment industry: the ethical behaviour of its clients.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
The gold rally
The price of gold reached a record high this week, passing $2,500 an ounce. Market watchers often ascribe a rise like this to inflation, fears about political instability or the endless insanity of the wild-eyed goldbug. But which is it? Today on the show, Katie Martin and Rob Armstrong unpack gold’s rise. Also we go long and short Nvidia.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
What will Jay Powell say at Jackson Hole?
Why do central bankers gather in the middle of nowhere every summer? And what will this week's meeting in the middle of nowhere mean for markets? Katie Martin and FT economics commentator Chris Giles explain everything you need to know about Jackson Hole. Also, we go long exclusive conferences and short exams.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
Markets resume previously scheduled exuberance
Two weeks ago, investors seemed headed for the exits. Now they’re back in and cash is flooding the markets again. Today on the show, Katie Martin and Rob Armstrong unpack the madness. Also, we go long gold and short social media.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.
Related Episodes
Economic Recovery or Economic Overheating?
Eric Winograd, AllianceBernstein's Senior Economist covering the US, Mexico, and Canada, joins The Pulse to discuss the US's rapid recovery from the pandemic recession, the outlook for the labor market, and of course, what's happening with inflation and the Federal Reserve.
Note to All Readers: The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date of this podcast. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this podcast. This podcast is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide tax, legal or accounting advice. It does not take an investor’s personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by AllianceBernstein or its affiliates.
The [A/B] logo is a registered service mark of AllianceBernstein, and AllianceBernstein® is a registered service mark, used by permission of the owner, AllianceBernstein L.P.
© 2021 AllianceBernstein L.P.
The Talk Pod: Investor's Edge with John Gardner
In this podcast, ALIVE Magazine columnist, Certified Financial Planner and Certified Investment Advisor, John Gardner, explains what are the “Six Keys to Retirement Planning.” Once again, John shares his wisdom, telling listeners about the proven, time-tested rules you need to know in order to succeed over the long term in investing. While John specializes in counseling high net-worth investors, his sound advice is applicable to listeners of all income levels. Listen and learn!
The Recent Market Rally & The Potential Impact Of Interest Rate Cuts
In this episode of New Focus on Wealth, host Chad Burton discusses the current market conditions and the potential impact of interest rate cuts. He explains that there was a rally in both stocks and bonds at the end of 2023, driven by the expectation that the Fed would cut interest rates four to six times. However, Burton warns that this may not be a positive sign, as excessive rate cuts indicate a struggling economy. He emphasizes that rate cuts are primarily beneficial for bonds and explores the reasons behind them, which is to stimulate economic growth. Listeners are encouraged to be cautious and mindful of the potential implications of these rate cuts on their investments.
Timestamps:
[00:02:17] Emerging market assets dropping.
[00:07:11] An interesting topic.
[00:08:35] Drop in real estate agents.
[00:13:30] Online crypto trading scams.
[00:17:19] Inflation and grocery store prices.
[00:19:32] Proper inflation rate.
[00:23:06] Bucket list and retirement expenses.
[00:28:31] Retirement planning and market volatility.
[00:30:06] Diet and its significant changes.
[00:33:09] Aging and health through diet.
[00:37:11] Annuities for growth.
Email your money question to chad@chadburton.com
Call 1-888-762-2423 for Wealth Management and Financial Planning services or visit www.ChadBurton.com
Tempted to Panic and Sell? Do These 3 Things Instead - 191
Brian Perry and Larry Swedroe on market volatility, whether, as President Donald Trump said, the Fed is crazy, and what 3 things you should do next to be like the greatest investor of all time, Warren Buffett. Plus, answers to your questions: can you roll a 401(k) into a home purchase? What's a good allocation of stocks vs. bonds? And find out why Joe says to contribute to your 401(k) plan regardless of the investment options and fees, and why he thinks Suze Orman is crazy and out of her mind! Transcript and show notes: http://bit.ly/YMYW-191
Inflation, Variable Annuities, Real Estate: How to Invest Against Risk - 321
Is selling rental property to buy a variable annuity a good risk management strategy against sequence of return and interest rate risks? Small-cap vs. emerging markets: which has better risk-adjusted returns for market volatility? Are eREITs (non-traded real estate investment trusts) a good retirement investment? Is RPAR Risk Parity ETF a good inflation hedge? Should you do tax gain harvesting in declining financial markets? Access the transcript and resources, ask money questions: https://bit.ly/YMYW-321
Related Podcasts
Podcast Notes Playlist: Startup
Closed-End Funds & Global ETFs
Putnam Perspectives
Podcast Notes Playlist: Business
