The old-fashioned folding stuff has become the global benchmark of value, according to Jan Loeys of JP Morgan.
Painful as it maybe for the likes of David Rosenberg, the “expensiveness” of cash is forcing up the price of virtually all other assets — and the JPM global asset allocation team reckon that as long as the return on cash remains pegged near zero, and investors continue to see uncertainty falling, money will keep flowing from cash into positive yield assets.
Loeys reckons that trying to use historical returns to place an outright value on such assets is a waste of time. As the strategist declares in the latest edition of the JP Morgan View:
Cash, as the hinge of the risk-return curve, has become the global benchmark of value. If the return on cash does not move, then other assets’ values need to fall in line with the expensiveness of cash.
Here’s the effect in chart form - a risk-return trade-off line for US assets that has just become flatter and flatter:
Here’s the international effect, across assets:
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