Is cash your best investment option this autumn?

The summer is always a good time to ponder an investment portfolio rather as a farmer considers which crops to plant in the coming season. Farmers are inherently pessimistic folk and like to plan for the worst.

So often investors are optimists, and such fools are easily parted from their money. Caution is always a good watchword in the financial world. Is there then a good case for holding cash now rather than investing in the hope of higher returns?

The Economist recently made a good case for expecting low returns in US equities over the next few years. Corporate profits may be past their peak and a low inflation environment will make it hard to push up prices.

Moreover, high personal debt levels and the end of house price inflation will keep the lid on consumer spending.

Try housing instead? Falling mortgage and re-mortgage figures suggest that the wind has been taken out of the housing market and indeed, this investment bubble may have burst.

Certainly recent house price inflation rates are entirely unsustainable. The only question is whether a soft-market turns into a hard landing, hardly a buy signal.

Rising interest rates have also been bad for fixed-interest instruments or bonds. Thus it is hard to find a safe home for investment, even in the hope of modest rather than great gains.
In fact, most of the risk is stacked on the downside.

Step forward the good, old-fashioned bank account. Now there is some worry over possible currency depreciation in the case of the US dollar, although this does seem to be largely over and a recession might take some pressure of the trade deficit and actually improve the value of the greenback.

Another option is to hold gold or silver, or more practically mining shares which will compensate for a falling currency. Or if you don't like precious metals then oil stocks are still cheap relative to the high oil prices that we see today.

However, the most sensible conservative investment strategy in a falling market is to hold cash and wait for lower prices.

At the very worst you will miss out on some modest rally in global markets, at the best you will have a chance to make big profits by buying quality assets later on at lower prices.

Middle East investors may find local shares or real estate a more attractive home for their cash, and both asset classes offer valuations that are not as yet stretched.

And for the time being this is probably a safer haven than some traditional places to stash regional cash. But watch for a substantial oil price fall which would be the sell signal in these markets.