Weighing up the ‘weight of money’ in cash
Despite signs that markets are recovering, there is still more money sitting in cash than there is in the total capitalisation of the ASX, according to Zenith investment analyst Dugald Higgins.
Zenith recently ran some numbers made available by the Reserve Bank to compare the amount of money parked in cash and cash-like products with the current capitalisation of the ASX.
"That reaffirms the idea that there's all this weight of money sitting on the sidelines," said Higgins.
But in spite of the ‘weight of money' on the sidelines, Zenith is seeing funds begin to trickle into some asset classes.
"The hunt for yield is a very pervasive issue. And depending on where you are in the world, sometimes the hunt for yield can be a relatively safe measure," Higgins said.
Investors who invest "intelligently" in the equities market can still find some relatively safe high-yielding stocks, he said.
But some of the members of Zenith's alternatives team are concerned about the so-called ‘dash to trash' to government bonds, Higgins said.
There is a stirring of interest in real estate, with unlisted property funds seeing an uptick in flows — albeit off a low base, said Higgins.
Investors are also attracted by retirement income products, with the leading edge of the baby boomers washing through the system, he said.
While people are still reluctant to move out of safe havens, the strong performance of the ASX and Australian real estate investment trusts may be the "catalyst" for them to be more risk-on, he said.
Higgins pointed out that the Australian equities market is very close to its peak in 2007.
"Will it get buoyed up by the weight of money rotating into it, or will it get pulled down by the counteracting force of what looks like a bit of a grim reporting season?" he asked.
"There are a lot of opinions floating about, and the only sensible one we'd offer is that nobody knows yet," he said.
Recommended for you
The new financial year has got off to a strong start in adviser gains, helped by new entrants, after heavy losses sustained in June.
Michael McCorry, chief investment officer at BlackRock Australia, has detailed how investors are reconsidering their 60/40 portfolios as macro uncertainty highlight the benefits of liquid alternatives.
Having reset its market focus to high-net-worth advisers, Praemium’s administration solution has been selected by Bell Potter in a deal that increases the platform's funds under administration by $6 billion.
High transition rates from financial advisers have helped Netwealth’s funds under administration rise by $3.7 billion in the fourth quarter of FY25.
