Beware Of The ‘Cash On The Sidelines’ Ruse

It is an off-the-cuff remark that goes unchecked far too often.

“Record amounts of cash are on the sidelines still waiting to get back into this market and will push it even higher.”

I heard this statement during the market peak in 2007 and throughout the financial crisis. And, I’m still hearing it frequently today throughout the post-crisis period. Find an on-the-spot analyst in search of a reason why stock prices will go higher, and often they will go to the “record amounts of cash on the sidelines” well to support their argument. Unfortunately, the notion of cash on the sidelines supporting higher future stock prices quickly falls apart under closer examination.

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