The Power of Cash: Why ‘Cash Is King’ During a Recession

cash is king during recession: Buy The Fear

Cash Is King in a Recession: Understanding Its Vital Role

Updated Aug 2023

So why is cash king in a recession? We could sum it up in two words: Hot Money.  However, for some strange reason, when it comes to the markets, individuals love long explanations even though, in most cases, the long descriptions reveal much less than the short ones.  Let’s look at a few things we ignore, but we know many investors do;

S&P 500 companies are going to report what will turn out to be the 6th consecutive quarter of lower stock market earnings.  Right off the bat, logic tells you we were right when we said hot money. What else would keep this market trending higher?  This is one of the longest-earning slumps in over a decade.

The following logical assumption would be, “Well then, there is no way stocks can keep rising”, or how long can they rise in a low stock market earnings environment? To get the correct answer, you need to ask the right question. Both issues are silly, and responding to either will not provide further insights.  One person will state it cannot rise because of the abovementioned negative factors. The other penguin will say it can increase because inflation is low, unemployment is low, gas prices are low and a host of other rubbish.

Cash Is King in a Recession: The Persistence of Skepticism Amidst Market Ascendancy

While it’s a widely acknowledged truth that “cash is king during a recession,” what often goes unexamined is when central banks will cease their monetary infusions into the markets. The answer might as well be “when hell freezes over.” This market is poised for a much longer ascent than most pessimists can endure.

An even more pertinent question arises: “Which side of the market do the masses favour?”

Herein lies the crux; the masses lean decidedly toward negativity. As long as they remain sceptical of this market, it will persist without a crash in sight.

But let’s delve further, even though these reasons don’t hold our primary concern, into why earnings might decline.

Energy and other commodity-based companies have witnessed a drastic profit plummet, making them the poorest performers for over 18 months.

A couple of additional factors come into play. Firstly, U.S. firms, on the whole, have reported reduced earnings due to the severe blows sustained by energy, commodity, and basic materials companies from dwindling prices. The energy sector, in particular, is poised to bear substantial losses once again.

The second factor is the robust dollar. It’s been on an upward trajectory, adversely affecting the profits of multinational corporations. This stems from the ongoing currency warfare; a strong dollar doesn’t bode well for multinationals, and vice versa. Furthermore, it impacts our exports, rendering our products more expensive in foreign markets.


In conclusion, cash indeed holds significant importance during a recession. It serves as a financial lifeline when times are tough, providing stability and liquidity. This is especially crucial in a market characterized by declining earnings and uncertainty.

Furthermore, the prevailing sentiment among the masses, which leans towards pessimism, can counterbalance, preventing a market crash as long as scepticism persists.

However, it’s essential to acknowledge that various factors, such as the downturn in earnings, particularly in energy and commodity-based sectors, and the strength of the U.S. dollar, affect the financial landscape.

In this ever-evolving financial environment, the role of cash during a recession remains vital, but it’s not the sole determinant of market outcomes. The interplay of multiple factors and “Hot Money” dynamics continue to shape the financial landscape, making it a complex and dynamic arena to navigate.

The only two things you need to consider are an extremely accommodative Fed and the masses refusing to embrace this market. Both developments are highly bullish for this market.

Data readily available to everyone is like news; the moment you hear it, it is no longer news but Gossip.

Originally published on October 7, 2016, this content has undergone several updates over the years, with the most recent update conducted in August 2023.

Other Articles of Interest

The Stock Market Forecast for Next 3 months: its better than you think

Stock Market Forecast For Next 3 months: Buckle Up

Unravelling the Secrets of Stock Market Success Updated August 1,  2023 Before attempting to predict the stock market's direction for ...
False Information trends

False Information and Its Consequences

How False Information is Fueling the Insane Bull Market Updated July 30, 2023 Indeed, the proliferation of false or misleading ...
Unveiling Mass Psychology: The Essential Element for Sustainable Triumph

Mass Psychology & Financial Success: An Overlooked Connection

An Introduction to Mass Psychology: Understanding Group Behavior? Updated July 15, 2023 Mass psychology is a branch of social psychology ...
The Level Of Investment In Markets Often Indicates the Financial Pulse

The Level Of Investment In Markets Indicates Fear Or Joy

Editor: Vladimir Bajic | Tactical Investor The level of investment in markets often indicates Panic or? Updated July 2023 The ...
right side of trend

Winning with Nasdaq 100 ETF: Riding the Right Side of the Trend

Unlocking the Potential of the Nasdaq 100 ETF: A Comprehensive Guide July 7, 2023 It is crucial to bear in ...
Riding the Waves: Exploring the Dynamics of Stock Market Trend Analysis

Stock Market Trend Analysis Decoded: Unveiling the Insights

Decoding Stock Market Trend Analysis: Unveiling the Insights Updated July 5, 2023 Disorganized data analysis was previously discussed in the ...
Market Fear: Don't panic and never follow the crowd

Market Fear Unleashed: The Cost of Stupidity in Investing

Market Fear Exposed: Unraveling the Costs of Fear & Folly in Investing Updated June 2023 The most effective, and perhaps ...
The place mass psychology and technical analysis converge to create the ultimate stock market timing system

Unraveling Crowd Behavior: Deciphering Mass Psychology

Defying the Crowd: Navigating the World of Non-Conformist Behavior Updated June 2023 Mass psychology is a fascinating field that plays ...
Understanding Crowd Psychology

Crowd Psychology: Unlocking Success in the Stock Market

 Updated June 2023 The Power of Crowd Psychology in Investment Decision Making The articles below aim to clarify the often-misunderstood ...
Risk to Reward Ratio

Risk To Reward Ratio & Opportunity Vs Risk

The Risk to Reward Ratio Dilemma: A Contrarian Perspective Updated June 2023 The risk to reward ratio, a fundamental concept ...
AI crimes

Real life doppelgangers

June 27, 2023 AI Perils Unleashed: Brace Yourself for Real Life Doppelgängers The video below sheds light on the perils ...
Unlocking Market Trends: Exploring Technical Analysis of the Financial Markets

Unveiling Secrets: Technical Analysis for Dummies

Demystifying Technical Analysis for Dummies: Unlocking Secrets Updated June 24, 2023 Technical analysis of financial markets is an approach that ...
What happens if the Stock Market Crashes: Jump in and buy

What Happens If The Market Crashes?

Updated June 2023 What happens if the Stock Market Crashes? Opportunity!!!!  When The masses panic: the smart money buys. Sol ...
Richard Russell Dow Theory, Useful or invalid

Richard Russell’s Dow Theory: Is It Still Valid?

 Richard Russell's Dow  Theory Signals Updated June 2023 Our perspective still favours the idea that a better alternative exists to ...
Random Thoughts: The Intricate Web spun by devious individuals

Random Thoughts: Web of lies Woven by Powerful Individuals

Random Thoughts: Resilient Minority's Struggle Against Overwhelming Odds June 18, 2023 It is essential to comprehend that the abandonment of ...