April 2024 | For most of the last year, savers have been earning a reasonable return in cash. But how long can these compelling cash rates last? Historically, the answer has been: not very long. In every rate hike cycle since the 1970s, the US Federal Reserve has “paused at the peak” federal funds rate for a matter of months, not years, and history suggests the rate cuts could begin soon. With history as a guide, we believe investors may benefit from locking in some of today’s historically elevated interest rates by moving out of cash and into short-term bonds.
01 | Savers have been earning a reasonable return in cash for the better part of the last year. But these compelling cash rates may not last long.
02 | Against the interest rate risk inherent in most fixed income securities, investors should consider the reinvestment risk inherent in cash.
03 | Once the Fed starts cutting its policy rate, cash rates could move hundreds of basis points lower in a very short period of time.
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