Need to Know: This banking giant has been saying cash is king. Now it advises a switch to stocks.

by | Nov 16, 2023 | Stock Market

Cash, you are no longer king. Long live stocks. That’s our call of the day from Barclays strategists who have switched their fealty from one of the year’s most popular investment choices to equities.

“After two straight quarters recommending cash over stocks and bonds, we now expect equities to eke out high single-digit returns in 2024 and outperform core fixed income,” a team led by Ajay Rajadhyaksha, global chairman of research at Barclays, told clients in a note Thursday. U.S. and European stocks, specifically, should enjoy those returns even if bond yields stay elevated, they say. Yields on short-term instruments like 3-month bills
have been north of 5%. Apart from Barclays (as far back as late 2022), hedge-fund billionaire Ray Dalio and DoubleLine Capital’s Jeffrey Gundlach have also been touting the benefits of “T-bill and chill” this year, and millionaires and individual investors have heeded that advice. But Rajadhyaksha and his team say it’s “time to take some risk” and investors can do better than that 5%. So why not bonds? The Barclays team explained that the argument against that asset class has been clear — too many pricing in imminent interest rate easing and not understanding U.S. fiscal challenges. Read: Stock and bond investors are convinced the Fed is finished with rate hikes. Why it isn’t a done deal. And: Hedge-fund manager Harris Kupperman says clamor for bonds, Treasury bills makes no sense Stocks were a tougher call and against expectations, higher interest rates have not led to lower price/earnings multiples, outside of a brief period in October, they say. An improved economy and hopes for AI-driven revenue and earnings have instead pushed stock gains, as a recent surge has also left the S&P 500
above Barclays’ year-end forecast of 4,200. Rajadhyaksha said they still think double-digit S&P earnings growth forecasts for 2025 are too optimistic, but global economic downside r …

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