{"id":6346,"date":"2023-09-04T08:18:48","date_gmt":"2023-09-04T08:18:48","guid":{"rendered":"https:\/\/prosfunds.com\/markets\/investors-parked-heavy-in-cash-may-be-making-a-mistake-nuveen-says\/"},"modified":"2023-09-04T08:18:49","modified_gmt":"2023-09-04T08:18:49","slug":"investors-parked-heavy-in-cash-may-be-making-a-mistake-nuveen-says","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=6346","title":{"rendered":"Investors parked heavy in cash may be making a \u2018mistake,\u2019 Nuveen says"},"content":{"rendered":"
\n

Investors sitting on the sidelines in cash and in money-market funds might consider moving into longer-dated bonds sooner rather than later, according to Saira Malik, chief investment officer at Nuveen. <\/p>\n

As look at historical returns shows the broader $55 trillion U.S. bond market typically outperforms short-term Treasurys at the end of past Federal Reserve rate hiking cycles since the 1990s.<\/p>\n

\n

The bond market produced an average 5.5% three-month rolling return following the last rate hike (see chart) in the past four Fed hiking cycles, while short-term Treasurys returned 2.1%.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

Of note, the magnitude of the bond market\u2019s outperformance faded by 12 months versus short-term positions, when looking at the Bloomberg U.S. Aggregate Bond Index\u2019s performance relative to the Bloomberg U.S. Treasury 1-3 Year Index.<\/p>\n

\u201cThe broad market typically experienced a strong relief rally immediately after the Fed pause and mostly outperformed the following year,\u201d Malik said, in a Monday client note. \u201cThis lends further credence to our view that overallocating to cash or short-term government debt could be a mistake \u2014 and that investors may want to start closing their duration underweights.\u201d<\/p>\n

Related<\/strong>: Investors skeptical about a \u2018soft landing\u2019 are more bullish on longer-dated bonds<\/p>\n

Individuals can gain exposure to Wall Street bond indexes through related exchange-traded funds, including the iShares Core U.S. Aggregate Bond ETF
\n AGG
\n and the SPDR Bloomberg 1-3 Year U.S. Treasury Bond UCITS ETF
\n UK:TSY3
\n for short-term Treasury exposure.<\/p>\n

Fed Chairman Jerome Powell signaled on Friday that additional rate hikes might be needed to keep the U.S. cost of living in retreat, even though rates already sit at a 22-year high and inflation has fallen sharply in the past year, while speaking at the annual Jackson Hole gathering in Wyoming. He also reiterated a vow to keep rates at a restrictive level for a while to keep inflation in check.<\/p>\n

Malik pointed to cooling housing inflation as a positive sign on the inflation front. Home buyers have pulling back as the benchmark 30-year mortgage rate hit an average of 7.31%, the highest levels since 2000. <\/p>\n

She also expects U.S. economic growth to slow and a \u201cpartial retracing\u201d of the 10-year Treasury yield
\n BX:TMUBMUSD10Y,<\/span>
\n following its surge in recent weeks.<\/p>\n

\u201cHistorically, the 10-year yield has peaked within the last few months of the final rate hike in a tightening cycle. We expect this hike will occur at either the September or November Fed meeting, and that the 10-year yield will decline through year-end.\u201d Yields and debt prices move opposite each other.<\/p>\n

Related:<\/strong> Pimco emerges as a buyer in Treasury market selloff, says Bond Vigilante theme \u2018a bit extreme\u2019<\/p>\n

Stocks were higher Tuesday, with the Dow Jones Industrial Average
\n DJIA
\n up 0.3%, the S&P 500 index
\n SPX
\n 0.9% higher and the Nasdaq Composite Index
\n COMP
\n up 1.4%, according to FactSet.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Investors sitting on the sidelines in cash and in money-market funds might consider moving into longer-dated bonds sooner rather than later, according to Saira Malik, chief investment officer at Nuveen. As look at historical returns shows the broader $55 trillion U.S. bond market typically outperforms short-term Treasurys at the end of past Federal Reserve rate […]<\/p>\n","protected":false},"author":1,"featured_media":6347,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[33],"tags":[],"class_list":{"0":"post-6346","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets"},"yoast_head":"\nInvestors parked heavy in cash may be making a \u2018mistake,\u2019 Nuveen says | Prosfunds<\/title>\n<meta name=\"description\" content=\"Investors sitting on the sidelines in cash and in money-market funds might consider moving into longer-dated bonds sooner rather than later, according to\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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