While money market and Treasury Bill rates look attractive and deserve an allocation in a diversified portfolio, overweighting them too much and forgoing opportunities elsewhere may result in regret in the not-too-distant future. Recency bias is a powerful force that can cause investors to project recent events and market conditions well into the future and may have grave consequences during what our work suggests is the ninth inning of the current rate hiking cycle.
It’s important to note that we do allocate to short-term Treasuries across our Strategies and believe that cash and cash-like investments probably deserve an overweight in today’s volatile market. However, shifting large allocations to cash without a process or plan to reinvest could have serious consequences and cause investors to miss out on other compelling opportunities. Experience teaches us that large market swings tend to shift back quickly as they revert to the mean.
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