For the first time in a decade, investors are better off with safe, liquid securities like cash than with the S&P 500 Index. That’s according to JPMorgan Asset Management, with $260 billion under management.
JPMorgan’s multi-asset strategy team upgraded its recommendation this week on U.S. cash to overweight for 2019.
“Our cash and duration overweights really distill down to overweights in U.S. cash and Treasuries, where ex-ante Sharpe ratios are now well ahead of those for U.S. stocks for the first time in a decade,” said John Bilton, head of global multi-asset strategy at JPMorgan Asset Management, where “Sharpe ratio” refers to the measure of an asset’s performance relative to its volatility.
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The Asset Management team said that they are getting ready “for an environment of slowing earnings growth and rising macroeconomic risks” that will take a toll on equities.
This echoes what Goldman Sachs said when they made their forecast for 2019 saying, “we see a weaker expected macro backdrop in 2019 as likely to limit return potential.”
The banks’ assessments make 2019 sound a whole lot like 2018, where the only winning asset of the year has been U.S. Treasuries. If they prove to be right, investors would be smart to keep it boring with cash in the new year.