Stocks face stiff competition from cash, says market forecaster Jim Bianco

Traditional savings accounts are going up against stocks.

And, the winner may be your neighborhood bank for the first time in years, according to Wall Street forecaster Jim Bianco.

He contends rising interest rates are giving investors safer ways to generate income.

“Cash is no longer trash. That was a two-decade old meme that doesn’t apply,” the Bianco Research president told CNBC’s “Fast Money” on Wednesday. “Cash could actually be somewhat of an alternative where it was just a waste of time throughout the 2010s. It’s no longer that anymore.”

He uses the 6-month Treasury Note, which is yielding above 5% right now, as an example. Bianco believes it will soon rise to 6%.

‘Suck money away from the stock market’

“You are going to get two-thirds of the long-term appreciation of the stock market with no risk at all,” added Bianco. “That is going to provide heavy competition for the stock market. That could suck money away from the stock market.”

His latest comments follow the Fed minutes release from the last meeting. The Fed indicated “ongoing” rate hikes are necessary to curtail inflation.

The Dow and S&P 500 closed lower following the minutes while the tech-heavy Nasdaq eked out a small gain. The S&P 500 is now on a four-day losing streak, and the Dow is negative for the year.

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“Investors are going to have to start thinking about the idea that we have a 5% or 6% world,” noted Bianco.

He believes inflation is unlikely to meaningfully budge in the coming months.

“A lot of people are starting to think… the Fed just is not going to go one extra rate hike, but they’re going to go many extra rate hikes,” Bianco said. “That’s why I think you’re starting to see the stock market wake up to it.”


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