“Time to go to cash,” we announced one night at the dinner table. It was early June. The Dow had nearly climbed back to its February 12 peak. The moment seemed ripe for a personal portfolio move. “What does that mean?” our six-year old daughter asked. “It means Daddy wants to put our money in a mattress,” her mother replied.
Granted, interest rates were in the lowest decibel range. But loss of principal was more on our mind than yield. More pressing matters – like whether to give our ten-year old a cell phone for her elementary school graduation (we did) – intervened, and the reallocation opportunity was lost. Last week equities swooned on fears of a second COVID wave.
Being held hostage to headlines is one of the big worries associated with liquid assets. Yes, you can ride the momentum wave up on good news, but bad news sends the roller coaster right back down. Even credit related assets, as we’ve described in our bond series [link], can be hijacked by technicals such as fund flows and Fed moves.