Anyone overweight cash here for the short term? Earnings yield is currently 3.32% TTM and 4.38% forward on the S and P (285 seems to be currently next 12 month consensus). Risk free yield is currently 4.2%… Have not seen earnings yield this low aside from a few times in history. Equity risk premium is negative although that did happen from 1996 all the way up through the top of dotcom, so stocks obviously did just fine during that period.
Trying to figure out what it is the market is pricing in here with assets up and to the right so violently in general (gold, crypto, etc), I suppose it's just higher for longer inflation. It seems like either earnings need to get a big mark up here in the next 12months here or risk adjusted it would be very difficult for stocks to outperform cash here?
Considering going overweight cash?
byu/Regular-Hotel892 ininvesting
Posted by Regular-Hotel892
3 Comments
Go for it.
It’s a free country.
Nothing like freedom bux.
Usa Usa Usa
But I can give you a handful of reasons why it wouldn’t be the worst idea, but it get’s pretty long winded.
Mostly because of Fed policy and where we are in the interest rate cutting cycle.
As interest rates go down, the opportunity cost for holding cash over Treasurys goes to 0, so investors could shift to cash, and prices could go down in a bid for Dollars alongside interest rates. People think interest rates going down is good, but really it is a response to Economic deterioration. They do it to spur lending, however, no one will lend to someone without an income, so it doesn’t do much.
I am trading this balls deep in TLT (~4k shares), on the premise rates, including the long end, are going back to near zero. It has been a long, painful trade lmao. The long end could very well just keep going up unfortunately, and things could just keep getting crazier and crazier.
The market can in fact stay irrational longer than I could stay solvent, hopefully, you do better. I need bank runs months ago.
I’ve been overweight 6 weeks. I went long in April, sold 2 months ago and then started putting shorts in. The current PE is untenable but I’m also happy to sit and wait short.
Yes I’m overweight cash at the moment. I’m convinced we’ve gone too far too fast – and it always seems like the deals show up when I’m fully invested.