Once offering the worst returns on Wall Street, cash now looks like the best asset to own, says Morgan Stanley

As Goldman Sach’s US chief equity strategist David Costin told clients after the S&P 500
SPX,
-1.29%

took just 17 weeks to reach its year-end target of 4,300, “upside appears limited while downside risks loom.” His concern is that we could fall into a 2000 trap, where the market declines even after growth stops, if the US goes into recession.

This brings us to ours the call of the day from Morgan Stanley strategist Andrew Sheets, who says investors should view cash as a viable investment strategy, even if it hasn’t looked like a profitable proposition in the past.

“Holding cash … has been an explicitly defensive decision for most of the last 12 years. It certainly offered a worse return than anything else in the market,” Sheets told clients in the bank’s Sunday note. That strategy also proved costly, with the dollar underperforming the S&P 500
SPX,
-1.29%

and the 10-year US Treasury
TMUBMUSD10Y,
2.984%

between 2010 and 2020 (excluding 2013 and 2018), he added.

“But the idea that having cash means paying for insurance is no longer accurate,” said Sheets, who noted that the 6-month U.S. Treasury
TMUBMUSD06M,
3.144%

yield (3.1%) is the highest since late 2007, offering 157 basis points more than S&P 500 dividends, 21 basis points more than 10-year Treasuries
TMUBMUSD10Y,
2.984%,
and only 60 basis points below the aggregate US bond index
AGG,
-0.70%.

“For US dollar investors, cash has ceased to be a significant impediment to current portfolio returns,” he said. Even holding cash in Europe, which used to be extremely expensive, is no longer as the German 6-month bill
TMBMBDE-06M,
0.339%

yield is positive for the first time since 2014.

Streets said that on a cross-asset basis, US dollar money offers high current yield, liquidity and better 12-month total return than Morgan Stanley’s own implied forecasts for US equity, US Treasuries, investment grade and credit with high yield – “with significantly less volatility.”

That’s why Morgan Stanley’s Core Optimized Fixed Income Portfolios are overweight short-term fixed income, he said. Against other currencies, the dollar is also holding up and the bank’s currency experts see more of this strength, especially against the euro
EURUSD,
-0.37%,
which hit parity again on Monday as concerns over Europe’s winter fuel shortages grew.

The market

Stock futures
ES00,
-1.11%

YM00,
-0.90%

NQ00,
-1.48%

slide south, with bond yields
TMUBMUSD10Y,
2.984%

TMUBMUSD02Y,
3.276%

reflecting cautious sentiment and oil prices
CL.1,
+0.14%

BRN00,
+0.12%

under pressure. Investors continue to pressure the dollar
dxy,
+0.21%

taller. Elsewhere it was a a stormy day in Asia and European stocks
SXX,
-0.90%

are under pressure.

The hum

Among the data and events this week, we’ll get PMI numbers, Q2 GDP, the Fed’s favorite inflation gauge, and the central bank’s Jackson Hole meeting, with Chairman Jerome Powell scheduled to speak on Friday morning.

To the beat of memes, AMC Entertainment
AMC,
-6.58%

rolls in front of start of trading for preferred equity unitsor ApesL, and London-based Cineworld
CINE,
-25.76%

confirmed that it was is considering filing for bankruptcy in the US. Stock up on fellow meme, Bed Bath & Beyond
Bibi,
-40.54%,
also falls.

CEO Elon Musk said that Tesla
TSLA,
-2.05%

will is raising the price of its “Full Self-Driving” feature to $15,000.

Join CVS
CVS,
+0.40%,
Amazon
AMZN,
-2.86%

is according to reports among the bidders for healthcare company Signify Health
SGFY,
-2.44%.

China’s central bank reduce your principal interest on the loan, a move aimed at shaking up the real estate market. Meanwhile, power outages in the southwesterly-hit drought affecting industrial companies and Tesla in Shanghai were extended.

Retail and tech names will report this week with Zoom Video
ZM,
-3.57%

and Palo Alto Networks
PANW,
-0.84%

due after close on Monday. Macy’s
M,
-4.53%,
Dick’s Sporting Goods
DCS,
-1.26%,
Dollar tree
DLTR,
-0.22%

and Dollar General
DG,
-1.47%,
Peloton
PTON,
-7.50%,
Nvidia
NVDA,
-4.92%,
Salesforce
CRM,
-2.21%

and Marvell
MRVL,
-2.58%

among other highlights.

Apple Group
AAPL,
-1.51%

Workers are reportedly defying the back-to-office order for next month.

Fans rushing to watch HBO’s Game of Thrones prequel House of the Dragon, which has a $100 million marketing campaign behind it, send the app to crash.

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The chart

RBC Capital’s head of U.S. equity strategy, Lori Calvasina, argues that stocks can and have made big lows even amid falling earnings forecasts, and her chart below shows those moments in history. While Calvasina remains concerned that likely further downward moves to 2022 and 2023 EPS estimates could lead to a more volatile stock market, she doesn’t think it will lead to a new bottom for the stock .

Top tickers

These were the most searched tickers on MarketWatch as of 6 a.m. ET:

Random readings

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