Investors should avoid the “cash trap” and step into risk markets – JP Morgan

FXStreet Insights Team FXStreet

Thanks to the Federal Reserve’s rate hiking campaign, cash looks more attractive today than in the last two decades. As a result, investors have flocked to cash products. However, investors should be wary of falling into the ‘cash trap,” analysts at JP Morgan say.

An equity investor who missed just the 10 best days since 2003 would have seen their annualized performance cut nearly in half

Over the last 30 years, cash has been unable to keep up with the creep of inflation. By contrast, other investments have been much better places to park capital. Moreover, for investors willing to take more risk, the reward has generally been worth it.

History has shown that by missing only a handful of the best trading days, investment performance can suffer. In fact, an equity investor who missed just the 10 best days since 2003 would have seen their annualized performance cut nearly in half.

Investors should remember that holding some cash is always necessary. However, they should also recognize that too much cash can become a liability. Despite the comfort that cash can provide, the most prudent move would be to avoid the ‘cash trap’ and step into risk markets.

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD eases toward 1.1700 as USD finds fresh demand

EUR/USD eases toward the 1.1700 mark in early Europe on Friday. The pair faces headwinds from a renewed uptick in the US Dollar as investors look past softer US inflation data. However, the EUR/USD downside appears capped by expectations of Fed-ECB monetary policy divergence.

GBP/USD steadies below 1.3400 as traders digest BoE policy update and US inflation data

The GBP/USD pair stalls the previous day's pullback from the vicinity of mid-1.3400s and a nearly two-month high, though it struggles to attract meaningful buyers during the Asian session on Friday. Spot prices currently trade around the 1.3380-1.3385 region, up only 0.05% for the day, amid mixed cues.

Gold seems vulnerable as USD bulls shrug off softer US CPI

Gold extends the previous day's late pullback from the vicinity of the record high and attracts some follow-through selling during the Asian session on Friday. The US CPI report released on Thursday pointed to cooling of inflationary pressure.

Bitcoin, Ethereum and Ripple correction slide as BoJ rate decision weighs on sentiment

Bitcoin, Ethereum, and Ripple are extending their correction phases after losing nearly 3%, 8%, and 10%, respectively, through Friday. The pullback phase is further strengthened as the upcoming Bank of Japan’s rate decision on Friday weighs on risk sentiment, with BTC breaking key support, ETH deepening weekly losses, and XRP sliding to multi-month lows.

Bank of England cuts rates in heavily divided decision

The Bank of England has cut rates to 3.75%, but the decision was more hawkish than expected, leaving market rates higher and sterling slightly stronger. It's a close call whether the Bank cuts again in February or March.

Ethereum Price Forecast: EF outlines ways to solve growing state issues

Ethereum price today: $2,920. The EF noted that Ethereum's growing state could lead to centralization and weaken censorship resistance. The Stateless Consensus team outlined state expiry, state archive and partial statelessness as potential solutions to the growing state load.