In 1974, 1982 and in 1990 the average level of cash in Mutual Funds in the US was around 11%.

They had less than 4.5% cash in 1933, 1976, 2000 and 2007 which we all know resulted in substantial losses in stock markets.

In March of 2000 it was only 4% cash after which the stock market fell around 43% over the next 1.5 years.

In June and July 2007 Mutual Funds had only on average 3.5% cash and we then witnessed a loss in the stock market of around 56% during the coming 1.5 years.

March 2011, 3.3% cash and July 2011, 3.3% cash levels. After this we witnessed quite substantial selloffs in stocks in the following months.

From July 2010 and until today we have had a range of around 3.3% to 3.8% cash and still we are seeing higher stock markets. This is quite different from the situation we have experienced over the last many decades. How is this possible? Could printing of money be the answer…?

This will most likely not continue forever. We wrote about in our monthly commentary for January that the average bull market cycle lasts around 4.5-5 years. Numbers like this is not something that by themselves be used to invest in markets but it is always good to keep in the back of our heads. More important is to have a set plan for how to deal with coming market scenarios whenever they arrive.

Do you have a plan for getting your client’s or investments out of the market if it starts falling and are your portfolio diversified enough to withstand a drop in stock markets whenever it arrives? Please get in touch to let us know your thoughts.

Speak to you soon.

Regards

Per Olov Jansson
CEO Cardea International
perolov.jansson@cardeainternational.com

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