On January 23, 2018, Ray Dalio said at the World Economic Forum in Davos, Switzerland, “If you’re holding cash, you’re going to feel pretty stupid.”

By the end of 2018, cash was one of the only investments that earned investors a positive return for the year.

The Federal Reserve this past year raised interest rates four times, adding 100 basis points to the range for its benchmark interest rate and setting the Fed funds rate at its highest level since the spring of 2008.

In turn, the yields on short-term U.S. government debt have risen to their highest levels since the pre-crisis period. Three-month bills now yield 2.45%. Six-month bills yield 2.52%. Two-year notes yield 2.86%.

Vanguard’s prime money market mutual fund now yields 2.44%. Sitting in cash would’ve earned investors in this fund a return of about $20 on a $10,000 investment from 2009 through 2015. Now, that cash yields as much as the 10-year Treasury note was earning at the beginning of 2018.

Cash: A competitive alternative to stocks

The year that began with cash being a stupid investment has ended with cash outpacing almost all investment classes in 2018 and offering what strategists see as a competitive alternative to stocks in the year ahead.

In November, Goldman Sachs’s chief equity strategist David Kostin said that in 2019, cash would “represent a competitive asset class to stocks for the first time in many years.”

Savita Subramanian, chief U.S. equity strategist at Bank of America Merrill Lynch, said the same, writing that, “Cash is now competitive and will likely grow more so. Cash yields today are higher than dividend yields for 60% of the S&P 500 today.”

In December, we highlighted work out of Jefferies which noted that the S&P 500’s dividend yield was below that of three-month Treasury bills for the first time since 2008.

The post-crisis world that saw equity markets catch a relentless bid from investors who were told there is no alternative to stocks is over. Cash is offering investors something rather than nothing. And, in fact, a little bit better than something.

From January 23 — when Dalio declared cash would make people feel pretty stupid — through the market close on December 27, the S&P 500 lost more than 14%. Since 2008, the benchmark index has lost more than 1% on an annual basis just once — in 2008. The S&P 500 is currently down more than 8% this year.

Many, of course, will note that the old adages advise investors not put cash under the mattress in times like these. “Be fearful when others are greedy, be greedy when others are fearful.” “Buy low, sell high.” “Buy fear, sell greed.” And so on.