Is cash an efficient asset allocation? Though returns offered by cash have been historically bad over the last 10 years, the tide has begun to turn on cash yields and investors will want to take note, Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley, reports.

Poor risk-reward for US equities at current levels

“For equity markets, if investors can now receive higher yields on low risk cash, we think it's reasonable to think that that should lead investors to ask for higher returns elsewhere, which should lower valuations on stocks. We see poor risk-reward for US equities at current levels.”

“We think it supports holding more US dollar cash in a portfolio. That's true for US investors, but also globally, as we forecast the US dollar to continue to strengthen.” 

“Holding cash isn't necessarily a sign of caution, it may simply be efficient allocation to an asset that has recently seen a major jump in yield.”