Traditional savings accounts are outperforming stocks.
According to Wall Street forecaster Jim Bianco, the winner may be your neighbourhood bank for the first time in years.
He claims that rising interest rates provide investors safer ways to generate income.
“Cash is no longer a waste of time. “That was a two-decade-old meme that no longer applies,” the president of Bianco Research told CNBC’s “Fast Money” on Wednesday. “During the 2010s, cash was merely a waste of time. That is no longer the case.”
He uses the 6-month Treasury note as an example, yielding more than 5%. Bianco anticipates that it will soon reach 6%.
‘Take money out of the stock market.’
“You will get two-thirds of the stock market’s long-term appreciation with no risk at all,” Bianco added. “That is going can provide strong competition for the share market. This has the potential to drain funds from the stock market.”
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His latest remarks come after releasing the Fed’s meeting minutes from the previous meeting. The Fed stated that “ongoing” rate hikes are required to keep inflation in check.
The Dow and S&P 500 fell after the minutes, while the tech-heavy Nasdaq gained slightly. The S&P 500 has lost four consecutive days, and the Dow is down for the year.
“Investors will have to begin to think about a 5% or 6% world,” said Bianco.
He thinks inflation will remain stubbornly high in the coming months.
“A lot of people are starting to think… the Fed isn’t just going to go one more rate hike, but many more,” Bianco said. “I believe the stock market is finally catching on.”
Stock Market refers to exchanges where publicly traded company shares are bought and sold. These financial activities are carried out through formal exchanges and over-the-counter (OTC) marketplaces that follow the rules.
It’s common to use the terms “stock market” and “stock exchange” interchangeably. On one or more of the stock exchanges that make up the overall stock market, traders buy and sell shares of stock.
The New York Stock Exchange (NYSE) and the Nasdaq are the two largest stock exchanges in the United States.