The world of traditional finance is filled with interesting trends and information, if one bothers to look far enough. Investors, who are often seen as the driving force behind stocks and other commodity markets, are turning back to cash. This is quite an interesting trend, considering cash stockpiles have never been this high compared to November of 2001.
Cash Lets Investors Retain Control
Market volatility has been wreaking havoc on traditional financial trading platforms for several years now. Things are getting so dire that global fund managers are increasing their cash stockpiles once again. Rather than flocking to stocks, bonds, or even Bitcoin, cash seems to be far more appealing due to its anonymity and ease of use.
Holding volatile stocks and bonds is not something any investor is looking forward to, even if there would be a promise for higher yields. But in most of these cases, a decrease in value is to be expected. Diversification of the portfolio remains crucial for global fund managers, yet reverting to cash seems to be the preferred option.
With an average cash allocation increase of 5.7%, it is evident global fund managers are afraid for whatever the future may hold. Moreover, there seems to be very little interest in conducting risky trades right now, given the financial turmoil all over the world. That being said, holding onto large piles of cash is not favorable either. Low-interest rates reduce the viability of keeping funds in a bank account. Plus, there is inflation to take into account as well.
There is an argument to be made as to how savings account may still make the investor some money, even if it is peanuts. Losing money is completely out of the question, though, which makes nearly all traditional investments less appealing. Bitcoin could be a viable alternative although the cryptocurrency is suffering from a bearish trend in the past few days as well.
It is not all negative news across the board, though. A lot of investors are confident the Brexit will not take place, as it would make little sense to both parties. There is also a positive-ish outlook for global growth during 2016, as numbers seem to be on track. But at the same time, all of these traditional financial tools are still on the verge of collapsing at any given time.
Source: CNN Money
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