Is stocks’ extended winning streak “an offer you can’t refuse”?
The S&P 500 has now closed higher for 14 out of the last 15 weeks. The last time that happened—1972—Nixon was President, David Bowie was better known as Ziggy Stardust, and audiences were lining up to see a new movie called The Godfather.
It’s yet another reminder of the potential opportunities that equities can bring to investors as they pursue their long-term financial goals—and the possible dangers of “sitting on the sidelines” by holding too much in cash.
As we’ve pointed out recently, new stock market highs have historically led to additional new highs. And while investors who have favored cash in recent years may have avoided short-term stock market declines, they’ve also missed out on last Friday’s rally that took the S&P 500 past 5,000 for the first time ever.
In fact, as the chart below shows, cash investors (the dark line) are now lagging the large-cap index (the yellow line) over approximately the past two years.
Stocks are Beating Cash Again
Source: Bloomberg, calculations by Horizon Investments, 02/09/2024
Holding lots of cash can make people feel secure. But that sense of safety may come with a big opportunity cost: missing out on the potential long-term returns offered by stocks—returns that can both exceed the return on cash over time and be helpful for many investors who need to successfully address their major financial goals.
What’s more, if the Fed cuts interest rates this year—a likely scenario—rates on cash equivalents will fall.
Ultimately, all investing involves risk; however, investors on a smooth road paved with cash today may find themselves out of gas tomorrow if they forsake the growth potential that long-term investments can bring to their goals-based financial plans.
This commentary is written by Horizon Investments’ asset management team. Past performance is not indicative of future results. Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves the risk of loss.
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