With\u00a0interest rate cuts\u00a0from the Federal Reserve on the horizon, it could be a good time to\u00a0shift cash, experts say.\u00a0\u00a0<\/p>\n
Traders\u00a0expect a rate cut in September, according\u00a0to the CME FedWatch Tool, which could lower the target range for the federal funds rate by a quarter percentage point or more.<\/p>\n
Meanwhile, many investors are sitting on hefty cash allocations, including trillions in\u00a0money market funds, which are generally\u00a0still paying above 5%.<\/p>\n
After a\u00a0series of rate hikes, investors piled into money market funds, which typically invest in shorter-term, lower-credit-risk debt, such as\u00a0Treasury bills.<\/p>\n
Total U.S. money market funds hovered near a record of\u00a0$6.15 trillion as of July 17, with $2.48 trillion in funds for retail investors, according to Investment Company Institute data.<\/p>\n
However, money market fund yields will likely fall if the Fed starts cutting rates in September, explained Ken Tumin, founder and editor of DepositAccounts.<\/p>\n
\u201cMost [money market funds] seem to closely follow the federal funds rate,\u201d he said.<\/p>\n
Next week\u2019s Fed meeting could signal whether a September rate cut will happen. But banks typically start slashing rates for high-yield savings accounts and certificates of deposits ahead of Fed rate cuts, Tumin said.<\/p>\n
\u201cCD rates will likely fall pretty quickly once it becomes clear that the Fed is on the verge of cutting,\u201d he said.<\/p>\n
As of July 25, the\u00a0top 1% average rate\u00a0for high-yield savings accounts was hovering below 5%, while the top 1% for one-year CDs was around 5.5%, according to DepositAccounts.<\/p>\n
CD rates will likely fall pretty quickly once it becomes clear that the Fed is on the verge of cutting.<\/p>\n
It is a great time to \u201clock in rates\u201d for a 9-month or one-year CD, said certified financial planner\u00a0Ted Jenkin, CEO and founder of oXYGen Financial in Atlanta. Jenkin is a member of CNBC\u2019s\u00a0Financial Advisor Council.<\/p>\n
When building a bond portfolio, advisors consider duration, which measures a bond\u2019s sensitivity to interest rate changes. Expressed in years, the duration formula includes the coupon, time to maturity and yield paid through the term.<\/p>\n
Some experts\u00a0suggest shifts\u00a0from money market funds to longer-duration bonds for longer-term investments, which could pay off once interest rates fall.<\/p>\n
Bond prices typically rise as interest rates fall, whereas money market fund investors can expect lower yields without price appreciation.<\/p>\n
While it is difficult to predict Fed policy, bonds could see \u201ca healthy lift\u201d if the Fed cuts interest rates by a full percentage point over the next year, Jenkin said.<\/p>\n
Like any investment, the best place for cash ultimately depends on your goals, risk tolerance and timeline.<\/p>\n<\/p>\n
With\u00a0interest rate cuts\u00a0from the Federal Reserve on the horizon, it could be a good time to\u00a0shift cash, experts say.\u00a0\u00a0 Traders\u00a0expect a rate cut in September, according\u00a0to the CME FedWatch Tool, which could lower the target range for the federal funds rate by a quarter percentage point or more. Meanwhile, many investors are sitting on hefty […]<\/p>\n","protected":false},"author":0,"featured_media":6804,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-6803","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/6803","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=6803"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/6803\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/6804"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=6803"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=6803"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=6803"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}