Since the onset of the COVID – 19 pandemic, the US dollars in circulation have increased by 1/3 over the last 2 years, with the printing of 4.6tr. In the process doubling the size of the federal reserve balance sheet.
This has undoubtable distorted markets globally and has led to asset price inflation
We are now at a major turning point in history with the reversal of a 30 year trend of declining interest rates.
The cash rates which peaked in 1991 with the Federal Reserve Chair Paul Volker rising them to 18% has fallen an unimangable low of 0.1%!
During this 30 year period, each attempt to increase interest rates was met with a significant decline in equities 1994 (capital stable crisis), 2018 (Taper tantrum). Each time the shares markets fell significantly resulting in central banks reversing course.
Unfortunately, what has changed this time is that in the first time in 30 years we are faced with the spectre of rising inflation.
Now central banks have no alternative but to increase interest rates to curb inflation. In the process they will trigger an inevitable recession which will take sentiment with it.
This is what we are faced with and we need to prepare for.
As such, it is very important for you to be proactive and review your portfolio to see if your cash levels are at an acceptable amount.