The ‘Cash Is King’ Trade Is Coming to an End. Which Big Cap Stocks Should You Buy Right Now?

Nov 06, 2023

Which Big Cap Stocks Should You Buy Right Now?

Since the Federal Reserve launched its campaign against inflation, cash has reigned supreme while equities have plummeted. Cash’s allure is decreasing, and a small set of equities appears to be more appealing.

According to the bank, about $80 billion in private-client money has moved into short-term Treasury funds since the beginning of 2022. The rush occurred after the Federal Reserve increased short-term interest rates, causing yields on short-term Treasury paper to skyrocket and driving banks to provide larger deposit returns.

The one-month Treasury bill has occasionally risen to around 5.3%, close to its highest level since 2007. This is appealing since it is well above the current rate of inflation. After all, stocks might decline at any time.

People have poured so much money into cash-like assets that their portfolios have become overburdened. Cash currently accounts for over 13% of the typical BofA private-client portfolio, up from roughly 10% in early 2022. When cash as a percentage of investors’ holdings reaches this level, it tends to fall.

And as we mentioned before, Big cap stocks were being smashed as consumers rushed into cash-like assets. The S&P 500 is still 13% behind its all-time high, set in early 2022, months before the Fed began hiking interest rates to dampen demand for goods and services.

Equity allocations among Bank of America clients have fallen from a recent high of 66% to around 58% of portfolios. Except with catastrophic circumstances like the lockdowns in early 2020, they seldom go below 56%.

Because consumers already have a lot of cash and not many shares, a reversal appears to be on the way. This is partly because when cash interest rates rise, investors must determine what to do with their money, and given the forecast for monetary policy, equities may be the way to go.

Already, money is flowing out of cash-like assets. Last week’s net migration into short-term Treasury bill funds was slightly under $2 billion, steadily decreasing from a record of about $10 billion in 2022.

What about the stock market?

It may perform well enough in the coming months as indicators of a weakening economy enhance anticipation that the Fed would decrease interest rates within a year. The rate of inflation is decreasing.

The stock market prefers lower inflation and the lower interest rates that it can deliver. According to Evercore, the S&P 500 averages a 9.5% annualized gain in each month preceding a rate decrease following the final hike in a tightening cycle. This corresponds to a monthly gain of 0.8%.

Rate cuts are more likely to occur when the economy is under stress. Therefore, defensive industries do best during these periods. Companies with communications services, such as AT&T (T) and Verizon Communications (VZ), as well as healthcare, utilities, and consumer staples, tend to flourish in relative terms since consumers require their products even when circumstances are tough.  

The average annualized gain for S&P 500 communications big cap stocks from the end of a cycle to the start of the next is roughly 22%. This equates to a monthly increase of around 1.8%. Utilities have an annualized gain of under 20%, while healthcare and staples have an annualized gain of roughly 15%.

That’s preferable to having money in the bank.

Subscribe Our Newsletter

4 Companies That Can Benefit From Buying Back More Stock
4 Companies That Can Benefit From Buying Back More Stock

Businesses now have far more cash than they had before the outbreak. Yet other companies have yet to restore their stock repurchase plans to their pre-crisis levels, creating a potential opportunity for investors.

Companies
Tesla Stock Is Down. Don’t Blame Cybertruck.
Tesla Stock Is Down. Don’t Blame Cybertruck.

The shares of Tesla are down a little on Wednesday. A story from The Verge said that Tesla had omitted a few important digits from their Cybertruck homepage, which may be the reason. That disclosure, on the other hand, is no longer news.

Companies
Get the ultimate solution: B2BinPay Get the ultimate solution: B2BinPay
Sponsored
Alexander

Top 5 Most Reliable Forex Brokers of 2022
The Forex market is the world's largest and most liquid financial marketplace, which allows traders to buy and sell currencies 24 hours a day. In 2022, a series of unprecedented economic and geopolitical developments in the global arena sparked heightened volatility in numerous currencies worldwide, which made trading on the Forex market particularly interesting.

discover
How to Start a Brokerage Firm? — Nuances and Aspects

Constantine

How to Start a Brokerage Firm in 2024?

Learn how to start a brokerage firm in 2024, covering legal steps, business models, technology, and compliance to build a successful and reliable company.

Fintech
Contact us bg

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Successful!
    Thank you for your request.
    We will contact you shortly.
    Close

    Constantine

    Best DAO Projects in 2025

    Best DAO projects in 2025

    Alexander

    Crypto Nodes That Pay: Your 2025 Guide to Top Passive Income Opportunities in Crypto

    crypto nodes that pay

    Alex

    Pi Network: Scam or Groundbreaking Crypto? The Full Analysis

    Pi Network Explained

    Constantine

    Triple Net Lease: Meaning, Benefits, and Strategies Explained

    Triple Net Lease

    Constantine

    Hanging Man Pattern: How to Identify and Trade It Effectively

    Hanging Man Pattern

    Alex

    5 Infinite Banking Mistakes That Could Cost You Thousands

    Infinite Banking Mistakes to Avoid

    Aleksander

    Solana Firedancer: Solving Solana’s Biggest Problems with a New Engine

    Solana Firedancer explained

    Alexander

    What Is an Interest Coverage Ratio? How to Use This Financial Metric to Evaluate Company Health

    Interest Coverage Ratio Explained

    Hazem

    After-Hours Trading: Can You Trade After Financial Markets Close?

    After-Hours Trading Explained

    Alexander

    How to Scale a Crypto Exchange Business and Stay Competitive

    how to scale crypto exchange business

    Constantine

    Crypto CrypticStreet Review: The Future of DeFi and Secure Crypto Trading

    Crypto CrypticStreet Review: The Future of DeFi and Secure Crypto Trading

    Alexander

    Bitcoin Power Law Explained: How It Shapes BTC’s Long-Term Growth

    Bitcoin Power Law Explained: How It Shapes BTC’s Long-Term Growth

    Hazem

    Megaphone Pattern​: What Is It? How to Use It In Trading

    Megaphone Pattern​: How to Read & Trade with It

    Constantine

    Top 5 Liquidity Bridge Providers in DeFi

    Top 5 Liquidity Bridge Providers in DeFi

    Hazem

    Max Funded IUL Explained: Is It a Legitimate Financial Strategy?

    Understanding Max Funded IUL

    Alexander

    Tax Refund Timeline: When Will You Get Your Tax Return?

    how long does it take for tax refund

    Constantine

    Crypto Liquidity — What is it, and How to Measure It?

    What is Crypto Liquidity and How to Measure It?

    Constantine

    AI in Finance: A Game-Changing Trend Shaping the Industry

    AI in Finance

    Hazem

    5 Ways to Make Money with ChatGPT and Build Your Wealth

    Make Money with ChatGPT

    Constantine

    Top AI Companies to Invest in April 2025

    Top AI Companies to Invest in March 2025

    DeepSeek vs ChatGPT: Which AI Technology is Better For You?

    DeepSeek vs ChatGPT: Feature-by-Feature AI Tool Comparison

    Constantine

    Top Solana Meme Coins in 2025: Best Presales and Where to Buy

    Solana Meme Coins 2025

    Alexander

    How Renewable Energy Stocks Can Supercharge Your Portfolio

    How Renewable Energy Stocks Supercharge Your Portfolio

    SEC Crypto Regulations: What Financial Advisors Need to Know

    SEC Crypto Regulations: Insights for Financial Advisors
    liquidity-provider-logo
    • News
      • Stock Market Forecast
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
      • AI
      • Technology
      • DeFi
      • NFT
    • Articles
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
      • Blockchain
      • Investing
      • NFT
      • DeFi
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
      • White Label Brokerage Platforms
      • Broker CRM Platforms
    [email protected]

    © 2024 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy
    This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.