For a dozen years after the financial crisis, stocks and shares were the only game in town, as years of easy money sent asset prices to the moon and cash paid next to nothing.
Over the past 18 months, the investment world has flipped, with investors embarking on a “dash for cash” as interest rates rise, while shares struggle as inflation squeezes spending and growth.
The US may be enjoying a bull market but that has been driven purely by the hype around the artificial intelligence revolution, which now seems to have got out of hand.
Investors have been piling into the “magnificent seven” US tech mega-caps – Apple, Microsoft, Amazon, Google, Nvidia, Meta and Tesla – but strip them out of the S&P 500 and the index is up only 5.6 per cent this year, while hopes that the Chinese stock market will recover have floundered.
A growing number of investors are now asking why they should put their capital on the line amid today’s slim pickings when they can get 5 per cent or 6 per cent a year on cash deposits without taking any risks at all.
Cash returns look set to improve as the US Federal Reserve and other banks intensify the fight against inflation by raising rates even higher.
The Fed held its funds rate at 5.25 per cent in June but markets are now pricing in a 90 per cent likelihood of a rate increase at its next meeting on July 25 and 26, with its recently published minutes suggesting at least one further rise to follow this year, and possibly more.
It may be forced to tighten as the US jobs market continues to boom, with payrolls data repeatedly beating expectations, says Fawad Razaqazda, market analyst at City Index and Forex.com.
“Will that trend continue? If it does, interest rates will likely rise and remain higher for longer,” he says.
As far as equities are concerned, the best is already in for 2023, says Nadege Dufosse, global head of multi-asset at fund manager Candriam.
Emerging Asia may perform well but otherwise “restrictive monetary policies should continue to spread throughout the economies of developed countries, and inflation is likely to decelerate only gradually”, she says.
Saxo chief investment officer Steen Jakobsen says investors are “naive” about growth prospects while the AI hype has gone too far.
“The economy is currently loaded with excess debt and asset valuations are at all-time highs. A soft landing is very unlikely in this environment,” he says.
Many have responded to the changing environment by shunning stock markets and seeking safety in cash and money market funds, which offer a portfolio of short-term cash deposits, money market instruments and high-quality bonds, according to Tom Stevenson, investment director at Fidelity International.
“As interest rates rise, money market funds represent an attractive return for risk-averse investors for the first time in years,” he says.
They appeal to investors who are concerned about market volatility, saving for a short-term goal or looking for somewhere to park their cash while deciding where to invest next, he adds.
Yet money market funds could make a poor long-term investment as Mr Stevenson suggests that “returns have lagged behind shares and bonds over more extended periods”.
Laith Khalaf, head of investment analysis at fund platform AJ Bell, says cash and money market funds may look attractive today but history shows that over the long run, stocks remain the better bet.
“Barclays has analysed UK investment returns since 1899 and found that over a 10-year period, shares beat cash 90 per cent of the time,” he says.
Jason Hollands, managing director at fund platform Bestinvest, says while higher interest rates are a headwind for equities, cash still pays less than inflation, eroding the value of deposits in real terms.
“Cash looks superficially attractive but holding too much for long periods will only make you worse off over time.”
With cash, savers only earn the headline interest rate while shares offer both capital growth and dividend income, which compound to deliver a superior total return over time, Mr Hollands says.
Instead of hiding in cash, he advises savers to increase their exposure to bonds, where yields have been rising strongly.
In the US, two-year Treasuries now yield more than 5 per cent a year while two-year UK gilts yield about 5.5 per cent.
While two-year fixed-rate savings bonds may offer a slightly better return, you cannot access your money in that time, he says.
“In contrast, you could sell your bonds at any time if you need some cash.”
Rather than buying individual government bonds, investors can have access to a spread of them through an exchange-traded fund such as the Vanguard Total Bond Market ETF, which focuses on investment-grade US bonds and with a trailing 30-day yield of 4.4 per cent.
Mr Hollands suggests we may soon reach “peak cash” as central banks in the US, the UK and Europe approach the end of the current tightening cycle.
“Interest rates are likely to fall next year as inflation abates and these economies sink into recession caused by aggressive policy tightening,” he says.
As interest rates rise, money market funds represent an attractive return for risk-averse investors for the first time in years
Tom Stevenson,
Fidelity International's investment director
When that day arrives, returns on cash will fall while lower borrowing costs should revive stock markets.
Mr Hollands is also wary of AI hype and expects Asia and emerging markets to lead the stock market recovery.
Today, he tips lower-risk sectors such as health care, consumer staples and materials as the economy looks set to struggle for a while longer.
Cash is back and about time, too. Savers have had a rotten deal for years and it is good to see the imbalance redressed.
But investors should not give up on shares yet. At some point, later this year or in early 2024, they are expected to flip back into favour, and those who are brave enough to buy them today will be rewarded when they do.
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Read more about the coronavirus
Specs
Price, base: Dhs850,000
Engine: 3.9-litre twin-turbo V8
Transmission: Seven-speed automatic
Power: 591bhp @ 7,500rpm
Torque: 760Nm @ 3,000rpm
Fuel economy, combined: 11.3L / 100km
MATCH INFO
Uefa Champions League semi-finals, first leg
Liverpool v Roma
When: April 24, 10.45pm kick-off (UAE)
Where: Anfield, Liverpool
Live: BeIN Sports HD
Second leg: May 2, Stadio Olimpico, Rome
Abu Dhabi World Pro 2019 remaining schedule:
Wednesday April 24: Abu Dhabi World Professional Jiu-Jitsu Championship, 11am-6pm
Thursday April 25: Abu Dhabi World Professional Jiu-Jitsu Championship, 11am-5pm
Friday April 26: Finals, 3-6pm
Saturday April 27: Awards ceremony, 4pm and 8pm
Herc's Adventures
Developer: Big Ape Productions
Publisher: LucasArts
Console: PlayStation 1 & 5, Sega Saturn
Rating: 4/5
UAE currency: the story behind the money in your pockets
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
WOMAN AND CHILD
Director: Saeed Roustaee
Starring: Parinaz Izadyar, Payman Maadi
Rating: 4/5
Scorebox
Dubai Sports City Eagles 7 Bahrain 88
Eagles
Try: Penalty
Bahrain
Tries: Gibson 2, Morete 2, Bishop 2, Bell 2, Behan, Fameitau, Sanson, Roberts, Bennett, Radley
Cons: Radley 4, Whittingham 5
Chef Nobu's advice for eating sushi
“One mistake people always make is adding extra wasabi. There is no need for this, because it should already be there between the rice and the fish.
“When eating nigiri, you must dip the fish – not the rice – in soy sauce, otherwise the rice will collapse. Also, don’t use too much soy sauce or it will make you thirsty. For sushi rolls, dip a little of the rice-covered roll lightly in soy sauce and eat in one bite.
“Chopsticks are acceptable, but really, I recommend using your fingers for sushi. Do use chopsticks for sashimi, though.
“The ginger should be eaten separately as a palette cleanser and used to clear the mouth when switching between different pieces of fish.”
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
ONCE UPON A TIME IN GAZA
Starring: Nader Abd Alhay, Majd Eid, Ramzi Maqdisi
Directors: Tarzan and Arab Nasser
Rating: 4.5/5
COMPANY%20PROFILE
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MISSION: IMPOSSIBLE – FINAL RECKONING
Director: Christopher McQuarrie
Starring: Tom Cruise, Hayley Atwell, Simon Pegg
Rating: 4/5
Results:
6.30pm: Maiden Dh165,000 2,000m - Winner: Powderhouse, Sam Hitchcott (jockey), Doug Watson (trainer)
7.05pm: Handicap Dh165,000 2,200m - Winner: Heraldic, Richard Mullen, Satish Seemar
7.40pm: Conditions Dh240,000 1,600m - Winner: Walking Thunder, Connor Beasley, Ahmed bin Harmash
8.15pm: Handicap Dh190,000 2,000m - Winner: Key Bid, Fernando Jara, Ali Rashid Al Raihe
8.50pm: The Garhoud Sprint Listed Dh265,000 1,200m - Winner: Drafted, Sam Hitchcott, Doug Watson
9.25pm: Handicap Dh170,000 1,600m - Winner: Cachao, Tadhg O’Shea, Satish Seemar
10pm: Handicap Dh190,000 1,400m - Winner: Rodaini, Connor Beasley, Ahmed bin Harmash
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%3A%3C%2Fstrong%3E%20Astra%20Tech%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3EMarch%202022%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3EAbdallah%20Abu%20Sheikh%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20technology%20investment%20and%20development%3Cbr%3E%3Cstrong%3EFunding%20size%3A%3C%2Fstrong%3E%20%24500m%3C%2Fp%3E%0A
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%203S%20Money%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202018%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20London%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Ivan%20Zhiznevsky%2C%20Eugene%20Dugaev%20and%20Andrei%20Dikouchine%3Cbr%3E%3Cstrong%3ESector%3A%3C%2Fstrong%3E%20FinTech%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%3C%2Fstrong%3E%20%245.6%20million%20raised%20in%20total%3C%2Fp%3E%0A
Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
Friday's schedule in Madrid
Men's quarter-finals
Novak Djokivic (1) v Marin Cilic (9) from 2pm UAE time
Roger Federer (4) v Dominic Thiem (5) from 7pm
Stefanos Tsitsipas (8) v Alexander Zverev (3) from 9.30pm
Stan Wawrinka v Rafael Nadal (2) from 11.30pm
Women's semi-finals
Belinda Bencic v Simona Halep (3) from 4.30pm
Sloane Stephens (8) v Kiki Bertens (7) from 10pm
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 201hp at 5,200rpm
Torque: 320Nm at 1,750-4,000rpm
Transmission: 6-speed auto
Fuel consumption: 8.7L/100km
Price: Dh133,900
On sale: now
