Cash Is Back: An Active Investment Decision

Cash as an active investment decision in your portfolio

Cash is a compelling asset class once again, after roughly a decade of unimpressive returns. Investors should be thoughtful about their cash management goals and how to meet them.

A cash management allocation acts as a complement to traditional fixed income investments by providing reduced risk, less volatility and enhanced liquidity relative to riskier assets, as well as a decent risk-reward trade off in today’s environment. Customizing a cash strategy with defined parameters and asset transparency allows investors to feel secure and prepared to take advantage of potential opportunities to come.

We spoke with Piton Investment Management who specializes in designing and managing tailored fixed income separately managed accounts for institutions, RIAs, and high net-worth individuals to walk us through the compelling argument of why cash makes more sense now and how to best allocate to it.

Why Cash Now: Economic Trends

Lofty Equity Market Valuations and a Flat Yield Curve

The current late-stage economic cycle requires prudence amidst lofty equity market valuations and a flat yield curve. The fourth quarter of 2018 showed us how quickly returns can be wiped out as broad market indicators, the S&P 500 Index and the Dow Jones Industrial Average Benchmark lost 9.18% and 8.66% respectively, in the month of December 2018 (Source: Morningstar). Despite the recent moves seen in the month of May, the risk market rebound thus far in 2019 may pose even more risk for investors, as credit spreads in riskier bonds have fallen and equity markets have risen sharply.