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Is It time to move cash off the sidelines? · UBS Trending

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  There are over $7
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  trillion sitting in money
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  market funds right now,
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  which is really close
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  to an all time high
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  with rates peaking.
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  Is it time to move cash
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  off the sidelines
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  and into fixed income?
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  We're going to break down
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  the data, the risks
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  and the playbook
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  right here on UBS
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  Trending.
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  Hi, everyone,
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  and welcome to another
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  episode of UBS Trending.
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  I'm Anthony Pastore.
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  Thanks for being with us today.
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  My guest in the studio is Tim
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  Ackerman from TransAmerica.
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  Tim, good to have you back.
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  Thanks, Anthony.
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  Appreciate you
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  having TransAmerica and me on.
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  Yeah, absolutely.
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  We love our partnership
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  with you all.
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  I want to talk
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  about this, this story of
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  over seven.
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  It's like $7.25 trillion
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  that's sitting in money
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  market funds right now or
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  cash instruments, CDs, etc.
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  we keep telling our
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  clients and our advisors,
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  look,
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  you've got to put
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  that money to work.
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  And I think it bears repeating.
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  And also to have
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  someone like you
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  up, great partner
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  like Transamerica, reiterate
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  the fact that it is
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  time to put that money to work.
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  Why should we be rethinking our
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  our cash allocation right now?
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  Anthony. Thank you.
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  Yeah, we have a campaign going on
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  nationwide called the Great
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  Cash Reallocation.
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  We're talking to
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  all of our partners about it.
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  Just think about the numbers.
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  In 2019,
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  we had $1.5
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  trillion in money
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  markets and cash
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  sitting on the sidelines.
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  Right.
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  We have 600% growth in that.
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  Now.
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  All the reasons
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  make sense, right.
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  Your clients were concerned
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  about the pandemic.
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  They got real rates
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  of return actually,
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  you know, getting almost 5%.
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  And it made sense
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  for all that time.
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  But guess what?
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  Things are changing.
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  And we're really concerned
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  that if you're not looking
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  at those returns,
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  you're going
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  to leave money on the table.
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  So we're moving
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  towards, you know,
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  advising clients, hey,
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  let's, let's,
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  let's take a look at this.
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  Right?
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  I mean, we were just talking
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  before we started.
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  You're looking at treasury rates
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  right now
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  is the benchmarks of course.
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  And if you
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  if you can stand the duration
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  risk and go out to a 30 year
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  treasury,
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  you're getting paid
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  5.1% on treasuries.
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  You look at some of these
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  muni equivalent.
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  You know, bonds
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  that are out there.
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  These instruments
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  and some of them are right,
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  six and a half to 7%.
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  I mean, the amount of rate
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  that you're getting for
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  putting your money
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  to work, it's unbelievable.
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  There's so much opportunity out
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  there, the opportunities.
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  Correct.
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  And just let's take a lesson
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  from history, right.
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  If you take a look
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  and not a political statement,
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  but if you take a look
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  at the Trump administration's,
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  you know, 1.0 focus,
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  it was really the stock market.
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  They gauged economic success
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  on what the stock market did.
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  Yeah.
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  If you take a look at recent
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  comments from,
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  the Treasury secretary,
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  Anthony Bezzant, he said,
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  you know what?
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  We've taking
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  a different a different focus.
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  We're really
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  looking at fixed income
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  right now.
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  And how fixed income
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  will be the leading indicator
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  specifically on the
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  ten year Treasury.
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  And you know what
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  they always
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  say, don't fight the fed.
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  And now you've
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  got don't fight the fed.
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  And you have the administration
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  focused on lower rates.
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  And they're not just
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  waiting on the fed.
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  They're actually saying
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  this time, hey you know what?
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  We're going to step in
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  and let the fed do what they do.
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  But we're going to go focus on
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  deregulation, lowering taxes
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  and you know,
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  that means that we're going
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  to be facing down
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  with lower rates.
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  And your cash on the sidelines
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  is not getting
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  what it used to get right.
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  And then that's
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  exactly the point.
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  And by the way,
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  we do here at CIO expect
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  that the fed is going to start
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  cutting rates
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  at the September meeting.
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  And we think a total of 100
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  basis points between September
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  and sometime in 2026,
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  probably
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  25 per, you know,
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  and so there is
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  the expectation that rates
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  are going to come down.
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  So the question is,
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  when you look
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  at some of the past cycles where
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  I mean, the numbers
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  never been at 7.25 trillion,
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  but when we've seen a lot of cash
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  out there,
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  what does the history tell you
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  about when people are taking
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  that money, putting it to work,
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  talking about rate peaks
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  and what
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  we're actually seeing versus
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  right now?
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  Well, you know what?
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  We have two data points
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  that have recently changed
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  that we
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  really should take a look at.
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  We have CD rates that have gone
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  from 5.9% to 4% by
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  32% decline and nobody noticed.
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  Right.
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  But but there we are, 32%.
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  We also have,
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  as of this past Friday,
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  many other brokerage
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  firms on the street
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  had a 4.08%
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  cash sweep account.
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  Super attractive.
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  And people were just leaving it
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  there. Yeah.
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  As of this Monday,
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  we're standing at an average
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  on the street at 2.83
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  or a 31% decline.
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  Right.
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  So these are knocking at the door
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  and no one's making a big splash
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  about it.
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  But you're slowly losing,
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  you know, those returns.
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  And, you know, Warren Buffett
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  says,
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  you know, take a page from him.
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  Warren Buffett says,
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  you know what?
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  You know
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  how you build a solid foundation
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  and how you win over time?
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  Sure, home runs are great,
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  but absolutely
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  pick up those nickels and dimes.
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  Right.
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  And that's what
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  we're talking about,
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  the great cash reallocation.
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  Yeah.
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  You're leaving nickels and dimes
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  all over the place,
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  and you're not picking
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  them up in your portfolio.
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  If you're not picking them up.
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  Like Warren says,
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  the returns are
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  not helping you.
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  I love that analogy, too,
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  because I'm sure
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  every single person watching
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  this has some jar at home
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  that has, you know, just hundreds
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  of quarters
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  and pennies and dimes,
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  and you dump that out
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  in one of those machines
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  at the bank,
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  and all of a sudden it's
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  a thousand bucks worth of change,
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  and you don't look at it
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  and think, oh,
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  that's a lot of money.
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  But in your scenario
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  and your analogy,
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  that's exactly right.
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  Those nickels and dimes
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  make a huge difference.
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  So I mean, that's the why, right?
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  That's the why we should care.
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  It's absolutely why you care.
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  And actually,
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  my brothers
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  and I have two brothers
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  and I can tell you
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  my parents used to have that jar.
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  Right.
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  And I didn't have a great machine
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  at this grocery store.
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  I had to like
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  in it in the paper.
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  Yeah, right.
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  And I used to catch my brother
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  being like one of those
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  that, hey, that
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  sneaky sneaky.
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  Right.
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  But but hey, no no no
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  no, I mean,
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  honestly that that is
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  true, right?
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  I mean, that's how we get ahead
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  in this game, right?
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  And we have to focus
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  on the entire portfolio.
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  And if we're just looking
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  for the home runs, right?
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  Billy Beane right.
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  Moneyball.
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  He says that, you know,
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  you got to get on base to win.
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  That's right.
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  And this is just getting
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  on base right.
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  Hitting singles.
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  This focus
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  on the great cash
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  reallocation is literally that
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  picking up the nickels and dimes
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  to add to your portfolio
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  and locking in rates now
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  as you guys are talking about
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  is a perfect time.
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  Yeah. Right.
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  Because you're actually
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  what you were talking about
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  just a couple of minutes ago was
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  we are starting to see the rates
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  slowly decline.
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  So if you're not getting in now
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  and you wait another month,
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  two months, six months,
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  you're not,
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  you're might miss out on
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  hundreds of basis points
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  in a difference.
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  And we know
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  when compounding comes into play
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  that's a massive
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  significant difference
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  in your portfolio.
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  So where's the alternative right.
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  I mean we're now seeing
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  you can see the flows.
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  Just look at the industry flows.
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  You're seeing flows
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  just inch up into the short
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  end of the curve. Right.
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  Like short duration
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  short term bonds.
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  Right.
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  That has had a big
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  carry right now.
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  And people are taking a look.
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  Advisors are
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  paying attention to that.
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  And they're doing
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  what is in the best
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  interest of their client
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  and moving those moneys.
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  Right.
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  Because we're not
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  no one's advertising that we
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  we reduced the sweep
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  rate from 408 to 283.
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  Right, right.
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  I mean, they're still promoting,
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  you know, a
• 7:19
  great CD rate
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  because we want them,
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  but they're eroding
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  32% less. Right.
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  It's a big difference.
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  So so here's the big question.
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  And kind of using that
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  Billy Beane baseball analogy,
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  how do you win the pennant.
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  How do you go all the way to win
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  this in the sense that should we
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  then be taking our money,
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  all of it, at one time
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  and throwing it into some fixed
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  income instruments?
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  Is it a gradual increase?
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  Are there particular
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  parts
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  of the asset class that you think
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  hold the most value right now?
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  What are your thoughts on that?
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  Tim.
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  Yeah, I mean it's
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  literally the Billy Beane thing.
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  You know, we're it's it is again,
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  it's picking up
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  nickels and dimes.
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  It is really just
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  legging into an opportunity.
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  We don't you know,
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  we don't know
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  where rates are going.
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  You know the trend is down
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  obviously.
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  And we're seeing it.
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  So you know
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  legging into these short
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  duration opportunities
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  a real short end of the curve.
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  Short term bonds really
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  that'll make up the difference.
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  It'll keep the volatility
• 8:11
  in your portfolio down.
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  We believe and I think that it's
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  it's a great opportunity
• 8:15
  to take a look at.
• 8:16
  Yeah.
• 8:17
  Any particular
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  part of the asset
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  class that you think
• 8:20
  hold the most
• 8:21
  potential value right now.
• 8:22
  Is it Muniz.
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  Is it you know it's it's
• 8:24
  something with mortgage
• 8:25
  backed securities.
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  I mean,
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  what do you think about that
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  part? Yeah.
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  I mean, we really believe,
• 8:30
  like a diversified portfolio.
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  I mean, honestly,
• 8:33
  we wouldn't feel comfortable
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  making one particular
• 8:35
  bet, but a diversified
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  portfolio, right?
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  I mean, is really
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  just the best way to go.
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  I appreciate that answer
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  because we say the same thing.
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  You want to have
• 8:42
  a really nice diversified basket
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  of some equities, some,
• 8:45
  you know, ex-u.s.
• 8:46
  instruments, different parts
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  of the fixed income asset class
• 8:49
  and even some
• 8:50
  alternative investments.
• 8:51
  So that seems to be
• 8:51
  a really successful
• 8:52
  portfolio right now.
• 8:53
  Right.
• 8:54
  Just look at the $7 trillion.
• 8:55
  Is that diversified right.
• 8:56
  We don't think so.
• 8:57
  Right
• 8:58
  I mean we've
• 8:58
  seen that 600% growth.
• 8:59
  So hey
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  take some of that
• 9:02
  and redeploy the asset.
• 9:03
  Right.
• 9:03
  So Tim thanks so much.
• 9:04
  Good conversation.
• 9:05
  Great.
• 9:06
  And you know
• 9:07
  everybody loves
• 9:08
  a baseball analogy you know.
• 9:09
  So anyway
• 9:09
  thank you for doing that.
• 9:10
  Good to
• 9:10
  see you
• 9:11
  as well from TransAmerica.
• 9:12
  And thank you
• 9:13
  to our great partners
• 9:14
  at TransAmerica for helping Tim
• 9:15
  make his way into
• 9:16
  the studio today.
• 9:17
  And thank you all for watching.
• 9:18
  There's a lot more information
• 9:19
  on our insights website,
• 9:21
  ubs.com/views.
• 9:23
  Plus you can take a look
• 9:24
  at all of the places
• 9:26
  where we are on social media, UBS
• 9:27
  I mean,
• 9:28
  we're talking about LinkedIn
• 9:29
  and Facebook
• 9:30
  as well as Instagram.
• 9:30
  You can follow us
• 9:31
  at UBS Trending.
• 9:32
  We've got lots of great content
• 9:33
  from the studio there for you.
• 9:35
  And as always,
• 9:35
  if you have any questions
• 9:36
  about what
• 9:37
  Tim and I spoke about today,
• 9:38
  please
• 9:39
  make sure you're
• 9:39
  continuing this conversation
• 9:40
  with your financial advisor.
• 9:42
  Until next time.
• 9:42
  I'm Anthony Pastore.
• 9:43
  You
• 9:43
  we wish you a
• 9:44
  great rest of your day.
• 9:45
  And remember to keep your eyes on
• 9:46
  what's trending.
• 9:47
  See you soon, everybody.