Traditional savings accounts go up against stocks.
And the winner could be the bank next to you for the first time in years, according to Wall Street forecaster Jim Bianco.
He maintains that higher interest rates give investors safer ways to generate income.
“Cash is no longer waste. This was a two-decade-old meme that just doesn’t apply,” the head of Bianco Research told CNBC’s “Fast Money” on Wednesday. “Criticism can actually be kind of alternative where it was just a waste of time throughout the 2000s. It just isn’t like that anymore.”
He uses 6-month Treasury notes, which currently yield above 5%, as an example. Bianco believes it will soon go up to 6%.
“You get two-thirds of the long-term appreciation of the stock market with absolutely no risk,” Bianco added. “That would provide intense competition for the stock market. That could suck money away from the stock market.”
His latest comments come on the heels of the release of minutes from the latest Federal Reserve meeting. The Fed has indicated that “continued” interest rate increases are necessary to curb inflation.
The Dow and S&P 500 closed lower after the minutes while the Nasdaq-heavy index posted slight gains. The S&P 500 is now on a four-day losing streak, and the Dow is negative for the year.
“Investors should start thinking about the idea that we have 5% or 6% of the world,” Bianco noted.
He believes that inflation is unlikely to budge significantly in the coming months.
“A lot of people are starting to think…the Fed is not going to raise rates once, but they are going to raise rates much more,” Bianco said. “That’s why I think you’re starting to see the stock market wake up to that.”
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