Stocks are competing against traditional savings accounts.
In accordance with Wall Street forecaster Jim Bianco, your neighborhood bank might win for the first time in years .
He contends soaring interest rates are providing investors safer ways to create income.
“Cash is no longer trash. That was a two-decade-old meme that doesn’t apply,” the Bianco Research president said to CNBC’s “Fast Money” on Wednesday. “Cash could actually be somewhat of an alternative where it was just a waste of time throughout the 2010s. It’s no longer that anymore.”
He uses the 6-month Treasury Note as an example, which is currently yielding more than 5%. Bianco predicts that it will soon reach 6%.
‘Suck money away from the stock market.’
“You are going to get two-thirds of the long-term appreciation of the stock market with no risk at all,” Bianco stated. “That is going to provide heavy competition for the stock market. That could suck money away from the stock market.”
His latest remarks come after the release of the Fed’s minutes from the previous meeting. The Fed stated that “ongoing” rate hikes are required to keep inflation under control.
Following the minutes, the Dow and S&P 500 fell, whereas the tech-heavy Nasdaq rose slightly. The S&P 500 is currently on a four-day losing streak, and the Dow is down for the year.
“Investors are going to have to start thinking about the idea that we have a 5% or 6% world,” Bianco said.
He believes inflation will remain steady in the coming months.
“A lot of people are starting to think… the Fed just is not going to go one extra rate hike, but they’re going to go many extra rate hikes,” Bianco noted. “That’s why I think you’re starting to see the stock market wake up to it.”
