Cash Waiting in the Wings

08Jan09

Cash in the Future?

In these tough times one thing we know for sure is that the equities markets have beaten down severely. We also know that the majority of investors’ accounts are now over-weighted in fixed income. What I mean by that is anyone holding any portion of their accounts in equities, even a small portion, have lost a great deal of those positions with the drastic negative returns. So it’s time to rebalance, and it’s time to invest. If you once held an 80/20 (Equities to Fixed Instruments) allocation that is now 50/50, it’s time to put some of that cash to work and return to your appropriate strategy. Or if you were lucky enough (I say lucky, because…..market timing does not work!) that you’ve been sitting in cash through these tough times, what an opportunity to invest!!!

At the end of November the amount Americans held in cash and cash equivalents was nearly $9 trillion! The amount of cash and cash equivalents in foreign accounts was nearly $30 trillion!!! That doesn’t mean it’s all going to poor into the equities markets tomorrow and we’ll all be riding on the high seas again, but when that cash does come in it will bring potential for enormous growth across most markets and sectors. Think about this; the nearly $9 trillion held in U.S. cash equivalents at the end of November represented 74% of the combined market value of the S&P 500. If you don’t think that’s a significant figure, you’re flat wrong.

So, when will the cash come pouring in? If it was all my cash, or my client’s, it would’ve already found its way into a diversified allocation of equity investment options. However, unfortunately it’s not. This will probably take a little bit of time, but the one thing we know for sure is that you’ll want to be invested when it does. For those cash holders right now, they’re asking themselves the same question. When do I invest? By nature cash will continue to look attractive to most during long-term downward trends, so we’ll need to get a little way down the rising road before we can expect to see that big push.

With that being said, how do we get going in the right direction? That’s the $1 trillion question of 2009. Will President-elect Obama’s stimulus package hit home and help the rally come sooner than later? Will we be able to slow the unemployment rate and get Americans back to work? Will the aftermath and solutions of the many problems we’re dealing with right now bring stability, and a safe road to a once again prosperous future? I say yes, but the big question is when. Until then, now is the time to get invested, stay invested, rebalance, and keep a positive state of mind about the resilience of our great country.

Sincerely yours,

Ronald J. Sloy

Learn more about Ron Sloy.

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