 | | Anthony Summers | The only thing worse than holding a dollar today... is holding a dollar tomorrow. Most folks know that's true... especially investors. Cash has long been a poor investment. The dollar's value has been destroyed by endless money printing. Its yield has been paltry compared with the returns of most other assets. [Have You Heard of the Bargain in Today's Market? Don't Miss Out! ] Yet cash has always had its place in a portfolio. When the market tanks, cash feels very safe. And when new bull markets are born, it's helpful to have a stash of investment capital on hand. But after a rough 2022, we've seen the markets - and the Nasdaq in particular - take flight this year. Yet today cash makes up more than one-sixth of the average portfolio's holdings... 
View larger image Is allocating that much to cash smart? Right now... yes. For one, the Fed's rate hikes have made holding cash profitable again. Real yields on U.S. Treasurys have hit nearly 15-year highs. But there's another reason investors are hanging on to cash. You see, for almost a full year now, our banking system has been bleeding cash. 
View larger image Bank deposits have shrunk as folks have pulled cash out of the system. But what's noteworthy here isn't just the flood of cash leaving our banking system... but also how banks are attempting to stop the hemorrhaging. We're facing a liquidity crisis. U.S. banks have been trying to keep stockpiles of cash in place in case of an economic slowdown or recession. Right now, banks are sitting on roughly $3.3 trillion in cash assets. Meanwhile - and this is crucial - they're getting choosier about who can get a loan. The percentage of loans being issued by banks in the form of credit has fallen sharply. It's now almost half its historical average of 7%. 
View larger image All of this means that both consumers and businesses have access to a smaller pool of cash... Which will likely further weaken our economy. It also makes the value of cash more important than ever... especially given that the cost to borrow money - that is, interest rates - is higher than it's been in over a decade. So that excess cash sitting in the average investor's portfolio? It might well turn out to be liquid gold in the months ahead. Invest wisely, Anthony Want more content like this? | | | | | Anthony Summers Anthony Summers is the Director of Strategic Trading for Manward Press and a contributor to Manward Financial Digest, Manward Trading Tactics and Manward Letter. He is a former senior analyst for The Oxford Club, where he closely worked with some of our nation's sharpest financial minds for nearly a decade. Anthony is a self-styled "conservatively aggressive trader" and has earned a reputation for developing unique trading strategies that focus on low-risk, high-return opportunities in both stock and options markets. | | | | 
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