Americans' love affair with cash investments doesn't appear to be fading anytime soon.
Investors may want to rethink their cash allocations heading into 2025, many on Wall Street are warning. Yields on cash-equivalent investments like money market funds , certificates of deposit and Treasury bills follow the Federal Reserve 's interest-rate moves. The central bank meets next week and is widely expected to slash rates by another quarter percentage point, bringing the federal funds rate to between 4.25% and 4.5%.
"If we look at historical evidence, cash as an asset class has lagged very significantly over a long period of time," he said. In fact, the S & P 500 had a total cumulative return of 35.5% from July 30, 2023 to December 11, he noted. Money market funds, with 12-months yields about 5%, averaged around a 7.34% return during that same time period, Alvarado said. He used the Morningstar U.S. Fund Money Market-Taxable category as a proxy.
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