Click here for insights on whether too much cash could be bad for your clients’ wealth, according to by Nils Bierkamp, PhD; Jonathan Cain, CFA, CAIA; Brian Donnelly, CFA; and David Hays, CFA; Fidelity Fixed Income Strategists.
Key takeaways include:
- Cash has provided liquidity, but since 1950, it hasn’t offered the same protection vs. equity drawdowns1 as bonds.
- Since 1980, bonds have outperformed a proxy for cash2 in the 12 months after the last Fed interest rate hike.
- One theoretical guidepost for forward bond returns suggests the potential for a healthy return in the coming years.
- An increased yield cushion has added protection against an absolute decline for the bond market in the past.
1 Drawdown refers to a reduction in equity prices.
2 A cash proxy is an asset class with return and liquidity characteristics that are similar to cash.
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