Spooked by market volatility, risk-averse Canadians are hoarding $75 billion in extra cash, according to a report from CIBC Economics.
Personal cash positions are at record levels according to CIBC deputy chief economist Benjamin Tal, and that's short-changing the Canadian economy, he said.
"From a broader perspective, the Canadian economy is losing out because capital is not being allocated efficiently," he said.
Canadians started building up their cash assets in savings and chequing accounts during the 2008 crash caused by failing banks and they're building on that hoard, he said. Cash holdings are up 11 per cent in the past year.
Tal pointed to the October 1987 stock market correction which lasted two months, while investors added to their cash position for 18 months following the crash, during which time the stock market rallied more than 20 per cent.
There's no doubt investors in stocks and bonds are taking a beating. The TSX has fallen 6.7 per cent since the beginning of the year and is at a two-year low.
But Tal says a "short Canada" mentality, meaning expecting low prices on Canadian assets, is affecting both stock and bond markets.
The Canadian stock market has been affected by the drop in commodity prices and has fallen as if it were an emerging market, he said. But that's overshooting the fundamentals, he added.
"What's more troubling than holding cash for long periods of time is that investors often move into it at precisely the wrong time," Tal said. "The usual response is to take money off the table at the worst possible time."
Canadians risk losing out on the rebound in stocks because they're too risk-averse, Tal said.
0 nhận xét:
Đăng nhận xét