Is this the year that investors will hide out in cash?
Each year, Byron Wien puts together 10 "surprises" — events that he thinks are likely to happen, but to which most would assign a low probability.
In 2016, one of Wien's predictions appears to be getting off to a good start.
"The United States equity market has a down year," Wien prognosticated in a missive released Monday. "Stocks suffer from weak earnings, margin pressure and a price-to-earnings ratio contraction. Investors keeping large cash balances because of global instability is another reason for the disappointing performance."
Stocks have slid mightily to begin 2016, though there is obviously a bunch of the year left, so the jury is out on that one. The same might be said about earnings and market multiples.
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But when it comes to investors moving to cash due to global instability, well, Wien's prediction appears to be playing out with remarkable speed.
And some traders say that going to cash indeed makes for a good strategy, at least in the short term.
Larry McDonald, head of U.S. macro strategy at Societe Generale, said stocks should continue to face challenges from weak technical indicators, plunging commodities prices and a strong U.S. dollar.
"All of this has created this credit risk that still hasn't cleared," McDonald said Thursday on CNBC's "Trading Nation." "You want to sell those rallies and raise cash over the next 60 days, and use every opportunity to actually put those greenbacks right back in your pocket."
Selling any significant rallies in the throughout January and February will leave significant capital for better buying opportunities later in the year, he said.
Craig Johnson of Piper Jaffray also believes that cash will come in handy as the S&P 500 continues to sink. While Johnson said the long-term secular bull market is still intact, investors should see a better entry point over the next three months.
"We could see this retest cut a little deeper in here, so having some cash on the sidelines ready to deploy during that final washout phase would certainly be a good move," Johnson said Thursday on "Trading Nation."
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