According to JPMorgan Chase & Co., central banks around the world will have to rely more heavily on loose monetary policy in order to sustain the need take on more debt, per a recent Bloomberg article. As such, a buildup in cash could help equities and bonds should investors on the sidelines decide to pull the trigger.
“’More debt, more liquidity, more asset reflation,’ was the conclusion strategists including Nikolaos Panigirtzoglou, who forecast a $16 trillion increase in worldwide debt this year that would push the combination of private and public sector borrowing to a record high $200 trillion by year-end,” the article noted.
The strategists noted that a confluence of higher savings rates, accommodative central bank policies and more cash circulating into the capital markets will eventually funnel into stocks and bonds.
“Elevated cash holdings create a strong background support for non-cash assets such as bonds and equities,” the strategists wrote. “Most of this liquidity will eventually be deployed into equities as the need for precautionary savings subsides over time.”
As such, investors who’ve stayed in cash can start building their portfolios with an optimal allocation to equities and bonds. Investors looking at a mix of equities and bonds can do so with exchange-traded funds (ETFs) like the following:
- Goldman Sachs Equal Weight U.S. Large Cap Equity ETF (GSEW). GSEW seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Solactive US Large Cap Equal Weight Index (GTR). The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index consists of equity securities of large capitalization U.S. issuers. The index is an equal-weight version of the Solactive US Large Cap Index, a market capitalization-weighted index that includes equity securities of approximately 500 of the largest U.S. companies.
- Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index. The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment-grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
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