- Dow Jones and S&P 500 making new records
- China injects $25.68 billion in the monetary system and lowest rate for the first time since 2015
- Wealthy investors bracing for a recession by stockpiling cash, But UBS says cash might not be the best strategy
- Bitcoin meanwhile outperforming every other asset class for the last 10 years
For the first time ever, the Dow Jones Industrial Average closed above 28,000 while the S&P 500 index hit its fourth consecutive record.
These bullish sentiments some market commentators believe are here to stay. JC O’Hara, Chief market technician at MKM Partners said,
“The melt-up continues. While the market has entered ‘overbought’ territory, we are not seeing any intensity from bears at this moment. While an overbought pullback is always a possibility, we continue to like the intermediate-term prospects for equities.”
On Monday, for the first time since Oct. 2015, China’s central bank lowered the interest rate on the regular reverse purchase open market operations to boost market confidence and prop up the slowing growth. PBOC also injected 180 billion yuan into the monetary system.
According to state media agency Xinhua, the US and China had “constructive talks” on trade while the Trump administration is expected to grant a 90-day license extension to allow US companies to continue doing business with Huawei.
The Louder the Denials, the Greater the Odds
However, Charles Hugh Smith, the author of the popular blog “OfTwoMinds.com” isn’t buying it. He said,
“The financial media is loudly declaring the current blowoff top in stocks is not a blowoff top.”
“The delicious irony here is these denials are reliable markers of blowoff tops: the louder the denials, the greater the odds that this is, in fact, the blowoff top that many pundits have been expecting for some time, but always in the future.”
While referring to the US Federal Reserve injecting $60 million per month to manage the repo mass that Fed Chair Jerome Powell said “in no sense” is QE Smith said, “Calling QE not-QE doesn’t make it different than QE.”
Wealthy Investors Bracing for a Recession by Stockpiling Cash
Despite the new heights reached by the market, investors are preparing for a turbulent period ahead that can result in a “significant drop” in the equity benchmark.
According to a recent survey by UBS Wealth Management, 55% of wealthy investors are bracing for a drop in the market before 2020 ends.
In the backdrop of concerns about the US-China trade war and economic slowdown, cash is emerging as the king. As can be seen in the portfolio of high net worth investors, it is ruled by cash.
These wealthy investors are holding 25% of their portfolios in cash, which is much higher than the UBS recommended by 5%.
As a matter of fact, cash holdings have been growing since the financial crisis.
Hoarding Cash, not the Best Strategy, Bitcoin Boat still here
Last week, Axios reported that firms are trying to protect themselves from recession but the pullback in spending by these major companies can actually help in causing recession or intensify the downturn in the economy.
But in a note from September, UBS said stockpiling cash might not be the best strategy. “Cash is an inefficient way of managing portfolio downside risk over the long term,” wrote UBS.
“Cash reduces the portfolio’s return during bull markets, while also providing very little ’crisis alpha’ during market drawdowns,” added the UBS strategists.
Like Ron Paul, former Congressman from Texas concluded in his poll, the majority of the people prefer to hodl Bitcoin than gold, bonds or Fed notes for the next 10 years.
A wealthy person gifts you $10,000. You get to choose in which form you’ll accept the gift.
But there’s a catch: You must keep the gift in the form that you choose for 10 years without touching it.
In which form would you accept the gift?
— Ron Paul (@RonPaul) November 4, 2019
Also, as we reported, Bitcoin has been outperforming every other asset class, US stocks bonds, gold, real estate, emerging currencies, and oil, for its entire 10-year history. According to analyst Willy Woo,” it's as performant today as it was in 2009, you haven't missed the boat.”