Published June 16th 2022

Daily Brief - The importance of dry powder

FED TODAY

Today we will get a rake hike from the Fed. The chance of a super-sized 0.75% rate hike is being debated after the WSJ first floated the idea.

The response from the market to a super-hike is hard to predict. It could drop fearing a recession, or rally in relief as it sees a Fed that is “in control”.

sweaty jerome

TLDR

‘What do I do with my cash’ remains the most common topic of discussion amongst Toggle users and our investors.

With 4 more hikes and quantitative tightening on the horizon, staying in cash is a legit alternative.

money

The power of dry powder

Are you investing for the long run? Then staying in cash for a quarter or two might not be such a bad idea.

Make no mistake, doing so means you believe markets will reach lower. You are exchanging a few quarters of return for the chance to buy value down the line.

However considering the joint effect of QT and 3-4 additional super hikes*, it is a fair bet to assume markets will heave and pitch, and offer us further downside entry points.

But how can I stay in cash with high inflation?

Inflation bites all assets, so forget about it.

The question you need to ask yourself is whether cash will outperform equities, treasuries, commodities, crypto or whatever is your favoured asset class.

As we wind down the “everything bubble”, markets will have a lot of retracement to do.

But how will I know when to buy?

Look for some anchors like 2.5% on US corporate bonds or 14x P/E for S&P 500. You will have skipped pain and market swings, and will have a clear path ahead of you.

bofa us corporate

* by “super hike” we mean rate hikes of 0.5%, which are double the usual steady 0.25% pace used by the Fed in the last decades.

Conclusion

Staying in cash is a legitimate investment decision. As markets will continue to swing, cash-holders will be the ones to pick the best deals once the dust settles.

Idea Spotlight: Disney

Price Level indicators for Disney dropped abruptly to 94.22 and historically, this led to a median increase in price of 9.49% over the following 2W. TOGGLE analyzed 8 similar occasions in the past to produce the median projection and this insight received 5 out of 8 stars in our quality assessment.

Walt Disney Co. could lose as many as 20 million of its Disney+ subscribers after being outbid for the streaming rights to the Indian Premier League cricket matches.

disney price june 15 2022

Daily Brief - The importance of dry powder

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