Investors should increase their holdings of cash, even with fears of a recession in the US this year, which may be exaggerated, according to Goldman Sachs Group Inc.
With a risk-free rate of 2.4% on three-month Treasury bills, "cash is a competitive asset", with allocations close to the lowest level in 30 years for many investors, analysts said , including chief strategist David Kostin. Tuesday.
The bank recommended that investors reduce their holdings of bonds this year and continue to invest in equities. Although US stocks may be under new pressure, Goldman's strategists have stated that they expect "positive US economic growth to support continued earnings growth."
"There is a potential for further decline in the stock markets in the short term, even if the recent collapse of the stock markets does not lead to a recession," writes the strategists. "There have been four bear markets without a recession since 1946. During these episodes, the S & P 500 index has declined an average of 21% over an eight-month period. If the current episode follows this historic trend, the S & P 500 could still fall in the coming months. "
Money market funds received inflows of $ 165 billion in November and December, the highest influx over two months since 2008, according to the note. On the other hand, equity funds generated cash outflows of $ 42 billion while investors "aggressively" traded in cash, analysts said.
After an eventful year in 2018, US equities have rallied and bonds have stabilized so far this year as investors anticipate the Federal Reserve's low rates for the first time in more than a decade.
Goldman Sachs lowered its 10-year Treasury yield rate forecast earlier this week by 50 basis points to 3%, saying they may have peaked during this cycle.
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