Cash Can Be a Drag When Rate Hikes End

Key takeaways

  • Waiting too long to shift cash into bonds can be costly.
  • Bonds can be better diversifiers of equity risk post-rate hikes.
  • Quality stocks have been resilient through volatility and still captured the upside.

What’s next for rates and the economy?

The Fed may be toward the end of this rate-hiking cycle but the dust is not settled. Current market pricing implies that the Fed will begin lowering rates as early as this summer, yet there are reasons to believe the Fed is more likely to hold rates steady until either inflation comes down meaningfully or the economy spirals toward a hard landing and deep recession.