{"id":31965,"date":"2023-10-19T17:22:58","date_gmt":"2023-10-19T17:22:58","guid":{"rendered":"https:\/\/innodebt.com\/markets\/cash-is-a-trap-warns-jpmorgans-david-kelly-heres-how-a-traditional-mix-of-stocks-and-bonds-may-pay-off\/"},"modified":"2023-10-19T17:22:59","modified_gmt":"2023-10-19T17:22:59","slug":"cash-is-a-trap-warns-jpmorgans-david-kelly-heres-how-a-traditional-mix-of-stocks-and-bonds-may-pay-off","status":"publish","type":"post","link":"https:\/\/innodebt.com\/?p=31965","title":{"rendered":"\u2018Cash is a trap,\u2019 warns JPMorgan\u2019s David Kelly. Here\u2019s how a traditional mix of stocks and bonds may pay off."},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0002629614\" role=\"document\">\n<p>Investors who have piled into cash risk being stuck watching markets rally from the sidelines, as money in a traditional portfolio of stocks and bonds could double in just over a decade, according to JPMorgan Chase &amp; Co.\u2019s asset-management business.\u00a0<\/p>\n<p>\u201cCash is a trap,\u201d David Kelly, chief global market strategist at J.P. Morgan Asset Management said during a media briefing Tuesday in New York on its latest annual outlook on long-term capital markets. It\u2019s \u201cimportant to take a long-term view.\u201d<\/p>\n<div class=\"paywall\">\n<p>A traditional portfolio comprising 60% stocks and 40% bonds may provide an annual return of 7% over the next 10\u201315 years, JPMorgan estimated in its 2024 Long-Term Capital Market Assumptions report. Cash has meanwhile attracted investors, with ultra-short-term Treasury bills currently yielding more than 5%, amid bond losses this year and a recent slump in stocks.\u00a0<\/p>\n<p>\u201cWe understand that cash is a comfortable place to be,\u201d Monica Issar, global head of multi-asset and portfolio solutions at J.P. Morgan Global Wealth Management, said during the media briefing. \u201cBut cash doesn\u2019t rally.\u201d<\/p>\n<p>U.S. stocks remain up this year after suffering losses during the third quarter as the equities market was rattled by a rapid climb in Treasury yields. The S&amp;P 500 index has risen around 13% so far in 2023 as of Wednesday morning, after slumping in August and September.\u00a0<\/p>\n<p>The spike in yields has hurt equities while pummeling long-term bonds, with the iShares 20+ Year Treasury Bond ETF<br \/>\n        TLT<br \/>\n       posting a 12.2% loss on a total return basis this year through Tuesday, according to FactSet data.\u00a0<\/p>\n<p>Ten-year Treasury rates<br \/>\n        BX:TMUBMUSD10Y<br \/>\n       climbed on Tuesday to 4.846%, their highest level since July 2007 based on 3 p.m. Eastern Time levels, while the yield on 30-year Treasurys<br \/>\n        BX:TMUBMUSD30Y<br \/>\n       rose to 4.951% in its highest rate since August 2007, according to Dow Jones Market Data.\u00a0<\/p>\n<p><strong>Read:<\/strong> Bonds look \u2018cheap\u2019 to top JPMorgan strategist getting defensive amid Israel-Hamas war<\/p>\n<p>Cash-like T-bills have fared relatively well, with the iShares 0-3 Month Treasury Bond ETF<br \/>\n        SGOV<br \/>\n       seeing a total return of around 4% this year through Tuesday as the underlying assets provide high yields in the wake of the Fed\u2019s aggressive rate-hiking cycle begun in early 2022.\u00a0<\/p>\n<p>For example, three-month T-bills<br \/>\n        BX:TMUBMUSD03M<br \/>\n       were yielding 5.5% in Wednesday morning trading in New York, FactSet data show.<\/p>\n<h4>\u2018Owning the stuff you hate\u2019<\/h4>\n<p>Kelly said that diversifying assets under a long-term strategy sometimes means \u201cowning the stuff you hate.\u201d\u00a0<\/p>\n<p>As for equities, \u201ceven if U.S. margins prove resilient, returns available in other developed markets remain attractive by comparison,\u201d according to the JPMorgan report. \u201cThe market dominance that U.S. firms enjoyed through the 2010s faces competition from Europe and Japan in particular.\u201d\u00a0<\/p>\n<p>The outlook for emerging-market stocks has \u201cmoderated,\u201d though, with investors \u201cincreasingly skeptical about the outlook for China and unwilling to pay high multiples,\u201d JPMorgan said.<\/p>\n<p>Shares of the iShares MSCI ACWI ex U.S. ETF<br \/>\n        ACWX<span>,<\/span><br \/>\n       which tracks an index of international stocks in developed and emerging markets while excluding the U.S., have risen 3.5% this year through Tuesday after falling 18.2% last year, according to FactSet data.\u00a0<\/p>\n<p>In the U.S., the S&amp;P 500 is recovering in 2023 from a 19.4% drop last year that marked its worst annual performance since the global financial crisis of 2008. While the index is up so far this year, it has slumped more than 2% over the past month, FactSet data show, at last check.<\/p>\n<p>Both \u201cstocks and bonds sold off in just three of the past 50 years: 1969, when inflation doubled in two years; 1974, when inflation reached a record 12% around the energy crisis; and 2022, when the longest continuous period of disinflation (1982\u20132022) in modern history came to an end,\u201d the report said.\u00a0<\/p>\n<p>According to J.P. Morgan Asset Management, the 60\/40 portfolio is \u201cstill a great starting point from which to extend out of cash and into a wide opportunity set.\u201d\u00a0<\/p>\n<p>The U.S. stock market was trading lower on Wednesday morning as investors digested third-quarter earnings results, including from Morgan Stanley<br \/>\n        MS,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/209104354\/composite\" class=\"negative\">-1.07%<\/bg-quote><span>,<\/span><br \/>\n       and long-term Treasury yields edged higher. The Dow Jones Industrial Average<br \/>\n        DJIA<br \/>\n       was down 0.5%, while the S&amp;P 500<br \/>\n        SPX<br \/>\n       fell 0.7% and the Nasdaq Composite<br \/>\n        COMP<br \/>\n       dropped 0.9%, according to FactSet data, at last check.<\/p>\n<\/p><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/story\/cash-is-a-trap-warns-jpmorgans-david-kelly-heres-how-a-traditional-mix-of-stocks-and-bonds-may-pay-off-ab371be5?mod=markets\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Investors who have piled into cash risk being stuck watching markets rally from the sidelines, as money in a traditional portfolio of stocks and bonds could double in just over a decade, according to JPMorgan Chase &amp; Co.\u2019s asset-management business.\u00a0 \u201cCash is a trap,\u201d David Kelly, chief global market strategist at J.P. Morgan Asset Management [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":31966,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[33],"tags":[],"class_list":{"0":"post-31965","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>\u2018Cash is a trap,\u2019 warns JPMorgan\u2019s David Kelly. 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