Cash is king

Troy Bombardia

2020-04-08

Investors and traders who went into cash in December, January, or February have significantly outperformed anyone with exposure to stocks. Every Fidelity Select mutual fund has underperformed cash.

Our Fidelity Funds Breadth indicator, which tracks the % of Fidelity Select mutual funds that outperformed short term Treasury Bills over the past quarter, is at 0%. This means that not a single fund has beaten cash, which isn't surprising given the epic market rout we've seen over the past 2 months.

This breadth indicator has remained at 0% for 20 days, which is a rather long streak. Similar long streaks were usually bullish for stocks over the next year, with the exception of February 2008 when the 2007-2009 bear market just began.

While the above stat was mostly short term bearish for stocks, I don't have a lot of confidence in short term predictions. Anything can happen in the short term, and it's easy to find bullish or bearish data to support a short term case. For example, more than 70% of NYSE issues rallied yesterday even though the S&P closed the day slightly lower than the previous day.

This has only happened 4 other times from 1962-present, all of which saw the S&P rallied over the next few weeks. Notice how this directly conflicts with the previous stat:

With that being said, this once again led to gains over the next 6-12 months.

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