While the ~0.3% return from US dollar cash between 31st January and 24th February was hardly impressive, cash nonetheless outperformed all of the other eighteen headline indices that we track. As data pointing to a still-hot US economy and stubborn inflation led to a sharp rebound in investors’ expectations for interest rates, both “safe” and “risky” assets came under pressure. Even industrial commodities, often a reliable refuge over the past couple of years when inflation fears have grown, performed poorly. After all, the most concerning sources of inflation at present seem to be the labour market and services sector rather than raw materials prices. So long as economic resilience in the US continues to be accompanied by signs of underlying inflation running well above the Fed’s target, cash may continue to be the only place to hide.
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