Time for equity investors to cash in their chips – Goldman Sachs
“Mixed-asset investors should maintain equity exposure but lift cash allocations,” said Goldman strategists, as cited by Bloomberg. “Cash will represent a competitive asset class to stocks for the first time in many years.”
The Federal Reserve’s recent interest-rate hikes have sent yields on money-market funds well over two percent, surpassing the pace of inflation. The Fed is expected to raise its benchmark by another quarter percentage point next month, and further in 2019. That means cash may become all the more attractive, according to Goldman.
Talking about stocks, the bank’s strategists said that investors should focus their portfolios on defensive sectors including utilities. The S&P 500 will generate “a modest single-digit absolute return” next year as the “robust” profit and economic growth seen in 2018 slows, they said.
The US stock market has been dragged lower by the tech-sector rout that contributed to an eight-percent pullback for the S&P 500. Fears of rising regulation, global trade tensions, rising interest rates, and other factors have also led to a broad sell-off in US equities. The tech-heavy Nasdaq Composite closed down more than three percent on Monday while the market benchmark S&P 500 slid 1.7 percent.
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