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Only if inflation was less you would be better of with cash in that scenario. At 7% that is still better deal than cash
by manquer 5y ago
Only if inflation was less you would be better of with cash in that scenario.
At 7% that is still better deal than cash
- adam_arthur 5y agoThat's only true if you're comparing holding a bond until expiry vs holding cash for the same time. Assume I have a 10y bond. I can buy it today for 2%. Or, I can sit in cash. Next month the yield goes up to 3%. I buy it then with my cash. I made more money by holding cash rather than the bond. Cashflowing assets are only a good inflation hedge after they've been valued using an appropriate discount rate for that inflation. Both equities and bonds are not valued appropriately for the level of inflation we have, because market participants still believe in transitory. But that belief is being shaken. Personally, I would hold cash over bonds or equity right now.