The flow of money into certain safe harbours reveals the predominance of a scarcity mindset
No, this is not a call to buy gold and hard assets because you can’t trust cash. If anything, people put too much trust in cash these days. They’re hoarding it in a way that calls to mind the pandemic stockpiling of toilet paper more than four years ago.
A report this week from CIBC Capital Markets says there’s roughly $250-billion in extra savings held in GICs and investment products such as money market funds that are designed for investors to park cash. Interest rates have been falling, yet CIBC found this amount has not moved meaningfully. Like so much in the economy today, the preference for cash is a story in two parts. Affluent people are parking accumulated cash they’re simply waiting to spend, while others hold cash for security. A recent Business InsiderFor a comparatively young generation, millennials have seen a lot of financial adversity in the 2008-09 financial crisis and the recent surge in inflation and mortgage rates.
More realistic numbers provided to financial planners for their work use a long-term average annual return of 6.4 per cent for the Canadian market and 6.5 per cent for foreign markets. The long-term cash return is projected at just 2.4 per cent.-If you’re worried about market crashes, set your calendar to remind you to make transfers of cash into your investments on a monthly or quarterly basis.
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