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In Every Bear Market, One Asset Always Surges in Value – This One

“The relative value of cash will necessarily zoom higher when stocks plunge.”

by Bob Stokes
Updated: April 07, 2020

A negative sentiment toward cash had been in place for quite some time.

Let's go back a little more than a year when our Feb. 2019 Elliott Wave Theorist showed this chart and

said:

RecordLowCash

The average cash holding in mutual funds just fell to an all-time low. All long term sentiment indicators look like [this], except for the ones that look even worse.

These headlines published later in 2019:

  • Why you shouldn't go to cash now -- in one chart (Aug. 6, CNBC)
  • 3 reasons to stay in a volatile market and not cash out (Aug. 8, Yahoo Finance)

These dismissive views toward cash are what to expect after a historically long uptrend in stocks. Many investors expected equity prices to keep climbing, so why hold cash?

Indeed, as recently as January, one highly prominent professional investor reverted back to the old saying, "Cash is trash."

However, in the same month, our Elliott Wave Financial Forecast said:

Cash is the only answer to survival in the coming environment.

The just-published April Elliott Wave Financial Forecast followed up with this chart and said:

BullMarketCash

Equities are the opposite of cash; risk-assets that require the surrender of cash. The relative value of cash will necessarily zoom higher when stocks plunge. The chart inverts the Dow's recent plunge to show the liftoff for a new bull market in cash... As [the book] Conquer the Crash stated: "When the stock market reaches bottom, you can buy incredibly cheap shares that almost no one else can afford because they lost it all when their stocks collapsed."

Speaking of a stock market bottom, are we almost there?

Well, as recently as March 28 (Marketwatch), a major financial website sported this sub-headline:

Coronavirus crash is a buying opportunity for focused, long-term investors

We've seen such sentiment before. Our latest Elliott wave analysis gives you our take on it and provides you with greater specificity on this historically rapid downturn.

Get timely insights from our just-published April Elliott Wave Financial Forecast. Learn about our risk-free trial as you follow the link below.

Hot Off the Press – Here's a Quote from April’s Elliott Wave Financial Forecast:

Increased volatility is the order of the day in all markets, including precious metals. On March 18, the volatility in gold exchanged-traded funds surged to its highest level since November 2008, which was during the depths of the Great Credit Crisis. At the same time, the spread between spot prices (those for immediate delivery) and futures prices (gold that will be delivered at a future date) expanded to its widest level since 1980, four decades ago.

The new Financial Forecast goes on to provide more insights into gold, including an analysis of gold exchange-traded funds.

Plus -- if you take advantage of EWI’s 30-day, risk-free trial, you’ll also learn about a “historic divergence” between the price of gold and silver – and how that divergence is likely to be “resolved.”

You can have our new Elliott Wave Financial Forecast on your computer screen in just moments.

Just follow the link below to get started with that risk-free trial.

The Myth of Shocks

Read Chapter 1 of Prechter's Socionomic Theory of Finance.

EXCLUSIVE

EuroSTOXX 50: One Way to Label This Chart You May Not Have Considered

An Elliott wave contracting triangle is a price pattern that often forms in a corrective wave 4 position -- meaning, a big move in wave 5 comes next. However, a variation of the triangle called a "running triangle" offers additional possibilities. Watch our European Short Term Update editor walk you through a chart of the pan-European index of 50 stocks and explain the implications.

EXCLUSIVE

Stocks and Skyscrapers Here We Go Again

We're not the first ones to notice a curious correlation between the timing of record highs in the stock market and proposals for building new skyscrapers. Watch our Financial Forecast co-editor discuss the latest proposal for an "upside-down" skyscraper in New York City.