LIVE MARKETS-Even cash has to work for a living

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EVEN CASH HAS TO WORK FOR A LIVING

With a slowing economy and policy uncertainty in the cards, Solita Marcelli, chief investment officer for the Americas at UBS Financial Services, is telling investors to put cash to work.

While the UBS base case is for the U.S. economy to slow to around its 2% trend rate this year, Marcelli says it "could weaken further if the Trump administration ultimately resorts to a highly aggressive trade policy."

And a contraction, while their base case, "would be possible if consumer spending and labor markets weaken significantly," she writes.

So Marcelli's suggestion is to take on "manageable levels of risks with excess cash" and it may improve returns and "combat the corrosive effects of inflation."

Specifically she advocates for putting cash into high-quality bonds and says diversified fixed income portfolios can lock in yields and provide robust income while dampening portfolio volatility.

"With the current 10-year US Treasury yield remaining at the higher end of its distribution since 2008, it should help cushion the total return outlook amid potential yield volatility," Marcelli said adding that "historically, the probability of bonds outperforming cash rises with longer holding periods."

So she says "optimizing cash holdings and seeking durable income should remain a strategic priority for investors."

But Marcelli also recommends "staying invested in stocks with hedges."

"Investors can also consider diversified fixed income strategies, senior loans, private credit, and equity income strategies to build diverse and durable portfolio income," the CIO said.

(Sinéad Carew)

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