Thursday, April 12, 2018

Cash Is on Top - for Now

A new study out from Pension Partners LLC points out that the best place for investors to be in the first quarter of this year was cash. Both bonds and stocks declined over the first three months, which means  that three-month Treasury bills outperformed both U.S. equities and long-dated Treasury bonds, returning 0.3 percent.

The fear among investors is that this trend will continue, but historically, it is relatively rare for cash to outperform both bonds and stocks. Pension Partners analyzed annual returns of the S&P 500, 10-year Treasury notes and three-month Treasury bill going back to 1928. Over that stretch, there were only 12 calendar years in which cash was the top performer.

And in longer time frames than a year, there are basically no scenarios in which cash is the optimal investment choice. Pension Partners notes that as investors increased their holding period from 1 year to 30 years, the odds of cash being king declines from 13 percent to 0 percent.

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