Ray Dalio, titan investor and founder of Bridgewater Associates, has come around to cash as a portfolio asset. While he famously declared that 'cash is trash' in 2020 and again in May of 2022, a strong dollar and booming economy make cash an increasingly valued asset today — one you should consider (if you haven't already) for your own portfolio.
A Bearish Retreat From Stocks
Investors and fund managers like Dalio are turning to cash holdings and away from stocks, taking advantage of interest rate hikes and fearing recession. According to Citigroup, dollars are the only asset worth using to hedge against a recession and severe stock volatility. When the dollar is out-competing all major global currencies and global factors including an energy crisis, supply chain issues, and war are causing unpredictable ramifications in the stock market, portfolio managers look to cash as a safer place to park investments or savings.
An Amazing Year for the Dollar
In large part due to the war in Ukraine and rising energy prices, European and Asian markets have suffered. This has prompted investors to look for 'safe havens' to safeguard their investments. Due to the sheer size of the U.S. economy and attractive interest rates set by the Fed, U.S. bonds have become the safest place to invest. The purchase en masse of U.S. dollars to buy U.S. Treasury bonds means that other global currencies suffer in turn. Relative to the dollar, the Japanese yen and the UK pound lost nearly 20% of their value, and the Euro lost 15%. While the dollar may be close to overvaluation, it's still firmly in good standing.