August 28 2020

Safe Savings

For some “safe” means stacking dollar bills under their beds, for other it is investing in real assets, such as property, at least for the satisfaction of having something tangible to fall back on in case. Gold is more a fantasy than an investment, certainly at $2,000 per ounce (~30 grams!) and no yield to boot.

For real, saving is an amount you put on the side for a future need. Ideally, the asset you invest will yield more inflation-adjusted money when the time comes to draw on your investment. Now, with rates lower for longer and recent Fed speech to let inflation run its course to catch up with past periods of subdued inflation, your saving becomes trickier.

Traditionally, with a slight attention to the matter, you would have invested your war chest into a good-old 60% equity, 40% bond portfolio. With rates already at zero, the pile of negative-yielding debt at $15 trillion, and inflation coming up…you’d better not linger in long-dated investment grade bonds. Counter-intuitively, they are no longer a safe part of the market. Going further, it even looks like cash-generative tech companies with their double-digit growth, and a big appetite for ripping out market shares from the rest of the laggards are actually a safer bet. Yes, safer, at least for now.

The death of the one-size-fits-all 60-40 model, is heralding the launch of new solutions, more agile by design, returning a substantially higher yield even for low-risk strategies, and certainly digital. As banking is now increasingly digital and mobile, blockchain allows finance matters to be safely-handled beyond monolithic institutions, the revolution will come from solutions that would merge the ability to save, earn money, and be used as a means of payment at the same time.

Save, earn, pay will become your new mantra for safe saving.

360 Advisory – Markets