Sell Cash, Buy Stocks As Powell Pivots?

A recent warning by YahooFinance warns investors to sell their cash and buy bonds and stocks now as the Fed pauses. To wit:

“Get out of cash now. Take advantage of some of these incredible things in the fixed-income markets, especially in the belly of the curve. Take advantage of the companies that are still available to you at reasonable prices,” said Gargi Chaudhuri, head of investment strategy at BlackRock iShares Americas.

Such advice certainly goes against a mountain of historical evidence from both inverted yield curves and Fed rate cuts that suggest investors should be selling stocks and heading to the safety of cash. For example, the four-panel chart below shows the previous yield curve inversions when more than 50% of the ten economically sensitive yield spreads we track were inverted. (Read this for a complete history.)

The red lines denote where 50% of the yield curves became inverted and how investors fared during the un-inversion process. In every case, investors were better off in cash, except for 1990, when it was virtually breakeven.

percent 10 yield curve