he two major asset classes in the world - stocks and bonds - have both seen huge price gains in 2019.
So, now what?
When asked whether going into all cash for the short-term is unreasonable, Steve Sosnick, head trader and chief strategist at Interactive Brokers said, "No."
"Presumably, if you've been in the market, you've had great returns, whether it's stocks or bonds," Sosnick said. Volatility is increasing, which sort of begs the question, unless you have a real conviction, perhaps you may want the option of being in cash that you want to deploy later."
The S&P 500, after having briefly dipped to a 12% year-to-date gain on account of Trump's added 10% to 25% tariff threat on Chinese goods, is back up to a roughly 17% gain for 2019.
Meanwhile, the ten year treasury is yielding 1.7%. Bond yields fall when their prices rise. The bond market has priced in more than the 25 basis point rate cut made in July. Now, investors are rushing into treasuries, as the tariffs threaten to further destabilize global economic growth.
"Warren Buffet has said that basically owning cash in a portfolio is as good as having call options," Sosnick said. "If the price of your call options are going up, wouldn't you want to own the option to be able to buy things when you see prices more favorable or, or situations a bit more clarified?"
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