Bank of New York Mellon’s asset management arm has set its tactical conviction toward cash at the highest possible level, out of concern that Federal Reserve interest rate hikes still have the potential to upend markets.

Investors are underestimating how high rates will have to go to curb inflation, sending the US and Europe into recession as early as the second half of the year, according to BNY Mellon Investment Management’s Aninda Mitra. The firm’s head of Asia macro and investment strategy drew a comparison between the environment today and the dotcom crisis at the beginning of the millennium, at an outlook briefing in Hong Kong.

“During the dotcom crash, a lot of equities looked very overvalued and the Fed was hiking rates as well,” Mitra said. “That was the time when we were probably last actively recommending keeping some powder dry.”

With tight monetary policy being re-priced higher for longer, the $1.9 trillion money manager has set its cash and Treasuries levels at “highest conviction” overweight.

Investors continue to mull the consequences of central bank rate hikes on the global economy, with some raising the prospect of policy error from too much tightening. But while the bond market shows some signs of concern, risk assets like technology stocks continue to push higher, with the Nasdaq 100 Index recently notching its best ever first-half of a year.

Still, BNY will look to put cash to good use, should a decline in risk assets create buying opportunities.

Equity valuations look “vulnerable” but could become attractive in the first or second quarter next year after markets have meaningfully sold off in a recession, Mitra said. The firm is also eyeing so-called fallen angels — once investment-grade debt downgraded to high yield status.

“Inflation won’t go back to 2% until 2025,” Mitra said. “Learn to embrace cash.”

(Corrects to clarify firm is not raising cash.)