Cash is trash – at least that’s how investors are treating it. Read this excerpt from our just-published Elliott Wave Financial Forecast for perspective:
In 2000, as the NASDAQ approached top tick, the March 2000 issue of The Elliott Wave Financial Forecast observed that U.S. mutual funds had just 4.2% in cash relative to assets in mutual fund accounts, the lowest ratio since January 1973… noting that the 1973 reading came “right before the biggest stock market decline since the Great Depression.” A shining new era for cash had in fact dawned, as the NASDAQ Composite started a 78% decline a few days later. The December [2024] mutual fund cash-to-assets ratio slid to a mere 1.6%. As shown on the chart below, this latest tick marks a new record low. This is not a small-scale extreme but one of epic proportion:
Pension managers are equally dismissive of cash. Here too, the experience at the 2000 dot-com mania peak is instructive. The middle graph on the chart shows that as the fever for stocks approached its final climax in March 2000, pension fund managers had steadily reduced their cash allocation to 6.4%. [Now], pension fund cash-to-total assets are just 2.1%.
It is not correct to say that investors are bravely taking on major risk. It is rather that investors perceive no risk whatsoever.
How are you treating YOUR cash? Get our analysis now by following this link.
If you’d like to sample us before subscribing, check out our Stock Market Highlights issue – FREE. Just follow this link.