In this volatile market, there are good reasons to put money into cash and short-term bonds.

No more “TINA” As the chaos continues in the market, it may be time to change how you invest and put your money back into some boring but safer options.

Since the financial crisis, investors have adopted a mindset called “There is No Alternative,” or TINA. This means that investors should stay in bonds and stocks for the long term and stay away from cash.

This feeling is changing as the markets fall. The S&P 500 is down almost 25% this year and has hit new bear lows as investors try to figure out how the Fed’s rate hikes will affect the economy. Some analysts and strategists now see opportunities in short-term bonds and cash that investors didn’t think much about before.

As the Fed’s rate hikes work their way through the system, many market strategists expect stocks to go down even more. They also mention a lot of low-risk, high-yield alternatives for investors who want to move away from stocks.

Moving Markets

Get back to basics.

High interest rates and this brutal bear market make even something as simple as cash a good investment. If anything, it makes it easier for investors to jump on market opportunities or stocks that they think are trading at good prices.

Adam Sarhan, CEO of 50 Park Investments, said that it works especially well for people who think we are in a bear market with more highs and lows to come.

For the fourth quarter, one of Wall Street’s favourite stocks is a casino stock that could double.

A bear market is a good time to hold cash, says Peter Boockvar, who works for Bleakley. But cash in a bank account usually earns less than money markets and short-term Treasury bills. He says that the 1-month and 3-month bills, with yields of 2.774% and 3.275%, respectively, on Friday, might be a better choice.

Not everyone is sure that investors should put their money in cash.

Jeff Kilburg, the founder and CEO of KKM Financial, says that you shouldn’t keep a lot of cash. It can be hard to know when to get out of or get into the market, and if inflation stays high, cash may have trouble keeping up.

Paul Christopher, who is in charge of global market strategy at the Wells Fargo Investment Institute, agreed with what Kilburg said.

Christopher said, “As soon as you get cash in a situation like this, where inflation is so high, you start to lose that cash quickly because of inflation.”

There are chances in the bond market.

Some investors think that short-term bonds look better than cash now that yields have gone up in the past few weeks. In the past few days, the yield on 2-year notes has been going up and up, reaching levels not seen in 15 years in September. Last week, the yield on 10-year notes briefly traded above 4% for the first time since 2008. That was 15 years ago.

Since the financial crisis of 2008, the Fed’s “easy money” policy has pushed investors to put their money into risky assets like growth stocks that offer big returns. As the market went up and interest rates stayed close to zero, investors had little reason to hold cash.

The story has changed because the central bank has tightened its rules in recent months and the bear market that has brought down Wall Street shows no signs of ending. Savita Subramanian of Bank of America said the same thing in a note to clients earlier this month.

There is no one strategy that works for all investors, and whether or not you put your money in cash or bonds often depends on how long you plan to keep your money there.

Both Moya of Oanda and Sarhan of 50 Park Investments said that younger investors may not want to put their money in bonds because they would rather use the money to buy attractive stocks.

If anything, the way the market is right now is proof that investors should diversify their portfolios and think about fixed income as an asset.


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