Cash

Last month U.S. investors had more of their assets in cash than in stocks. This is the first time in more than 20 years that this has happened. Why is this a good thing? This is a positive sign because there is a lot of money out there to continue to fuel the current stock price increases we have been seeing.

Since Black Monday back in 1987 this has been an important ratio. After the crash in 1987 investors pulled so much of their money out of stock and put it into cash accounts that the ratio favored cash over stocks. Since then this is the first time this has happened.

In March investors held a record 45 percent of assets in cash, including money-market investments, and a record-low equity allocation of 41 percent. What are the ratio’s normally you ask? Historically investors keep about 60 percent of their assets in stocks and 25 percent in cash.

This may be good news for the near future of stock prices. Because there is so much cash available that is not currently in the market investors have enough buying power to keep stocks moving higher. This does not guarantee that stocks will continue their upward trend, but it is a good sign that it is possible.

So once again, just like homes, this could be the best time to buy. Buy low and sell high is the way to make money. So even if you are not going to use the money you put in the stock market for a number of years – this could be the low. Now don’t blame me if it is not and you lose money! I am just saying – there are a lot of positive signs out there pointing to a better future for the stock market as well as the housing market.

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Have a great Tuesday!