‘Cash is trash’ was a familiar saying in financial markets in 2019 and early 2020. It was even suggested in Davos on Tuesday 21st, January 2020. How fast this view has changed. Only last week we received an invite to a talk on cash as a new asset class. The financial markets have an impressive ability to switch from one extreme to another. The reality is usually somewhere in between.

The truth is centred around interest rates and how much money you will be paid for your cash. Looking at the UK Bank of England official base rate we can see that the BofE is willing to pay 5.25% per annum (minus a bit for transaction costs and third-party paperwork). This has ranged from a lofty level of 17% in November 1979 to a paltry 0.1% in March 2020.

From a low in 2020, the rates on offer today look staggering but in reality, the average since 1931 has been 5.24%. Is it time to look under the mattress, not for bed bugs but the cash you stored for a rainy day?