What should you do with your cash with US Fed interest rates peaking? — Endowus cash management solutions (March 2024)

Earlier this month, the Federal Reserve chair Jerome Powell reinforced his belief that the Fed will cut its key interest rate in 2024, in line with the consensus among over 50 fund manager partners collected in an Endowus survey. 

The personal consumption expenditures (PCE) price index, Fed’s preferred inflation gauge, remained above the 2% level in its latest print published late February. However, the core reading (excluding volatile food and energy categories) on an annual basis hit its lowest since February 2021. 

While the US central bank had confirmed that it is "not far" from gaining the confidence it needs in falling inflation to begin cutting interest rates.  Powell maintained the Fed would first want to see more evidence that inflation is falling sustainably back to the Fed’s annual target of 2% before starting to action on rate cuts.

Against this backdrop, the market is increasingly predicting interest rates to be “higher for longer” and the latest Treasury swap market also implies the odds of a June rate cut at less than 50%. 

Now that interest rates have peaked, what should investors do with their cash? What are the current yields for liquid and near-liquid instruments looking like? Before diving into that, let's look at the options available on Endowus to grow your hard-earned money. 

You can select from a list of cash management or liquidity funds available on our Fund Smart platform, or consider our CashUp portfolios that may allow you to earn higher yields with no penalties on redemptions.

More importantly, enjoy daily liquidity for full flexibility. The funds on the Endowus platform are well diversified and enable you to take advantage of high yields in the current environment while minimising concentration risks to single issuers.

We have these solutions available in HKD, USD. Endowus also has corporate cash solutions, which you can find out more about here.

With higher interest rates, net yields as of 29 February 2024 now range from 4.16% to 5.49% p.a.* for cash management funds available on the Endowus platform.

Cash management solutions on the Endowus platform

Here are the key money market or liquidity funds available on the Endowus platform:

For HKD:

• E Fund HKD Money Market Fund
• GaoTeng WeInvest HKD Money Market Fund
• HSBC Global Money Hong Kong Dollar

For USD:

• E Fund USD Money Market Fund
• GaoTeng WeValue USD Money Market Fund
• Abrdn Liquidity Fund USD
• Ping An USD Money Market Fund
• Amundi Cash USD Fund
• HSBC Global Money US Dollar

How do US Fed interest rates affect you?

The Fed fund rates play a critical role in shaping US monetary policy, with the most recent mission to tamp down high inflation in the country. Rates also have a broad impact on various aspects, from determining rates offered on savings accounts and the cost of personal and company borrowing.

This begs the question - Should we react every time the Fed fund rates change?

Indeed, it is very tempting to bet on rates and other news flows, but chances are we rarely predict rate movements right. Even if we do, consistently making the right bets based on that prediction is an insurmountable challenge. This adds to the complexity of the market, which arises from the interplay of various factors, such as economic indicators, geopolitical events, company performance, and investor sentiment, to name a few. 

As your financial advisor, Endowus advocates goal-based investing for our clients.  Cash management funds are great tools which offer flexibility for your liquidity needs. For your longer-term goals, such as retirement, staying invested is key to harnessing the long-term compounding power of investing.  You can also consider using a dollar-cost averaging (DCA) strategy to help ride through cycles and take the emotions out of investing.

Read more: Goal-based investing and why it matters

The smart and flexible way to earn more on your cash for short-term liquidity needs

Looking for solutions for your short-term liquidity needs?  You can consider our CashUp Portfolios, which are meticulously curated by our Endowus Investment Office. We offer two options. CashUp - Simple and CashUp - Plus, offering current net yields of 5.0 - 5.2% p.a.* and 5.1- 5.3% p.a.* respectively. 

Our fees on cash management solutions are only at 0.10% p.a., making our offerings highly competitive for your low-risk investments. This is on top of our longstanding practice to rebate any trailer fees back to our clients. Learn more about our Endowus CashUp Portfolios here.

Make your cash work smarter for you. If you have money set aside for an upcoming expense, earn higher returns on it instead of letting it sit idle in your current account.

Click here to get started on Endowus Hong Kong in just a few minutes.

*As of 29 February 2024. Net yield after deducting fund-level fees and Endowus access fee, and adding back rebates. Source: Endowus Research and HSBC Asset Management.

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