The Federal Reserve dropped a significant hint in August that it is likely to reduce its benchmark lending rate in the upcoming months. Following the market rout in early August, expectations in the futures market have swung to a likelihood of 4-5 rate cuts by the end of the year. It was only in June when the Fed dialled back on its forecast for cuts, and anticipation was that there would be only one rate cut for the year. This, again, highlights the futility of betting around the policy directions of the Fed, or of any policymakers for that matter.
While the central bank has stated that it will maintain current interest rates for now, the latest policy statement reveals that Fed officials are now cautious about potential risks in the US labour market.
Fed Chair Jerome Powell expressed optimism about recent progress in inflation, stating that “the second quarter’s inflation readings have added to our confidence, and more good data would further strengthen that confidence.” Uncertainty is not behind our back as the Fed chief also cautioned against assuming that a cut was definitely happening. Powell also highlighted that any additional cooling of the job market, which appears to have returned to a pre-pandemic state, could be a cause for concern for the Fed.
Eyes are also on the annual Jackson Hole Economic Policy Symposium in Kansas City on 22-24 August, it is widely expected that more clarity will be given on when the central bank will finally tee up and grant the interest rate relief the market has been anticipating.
Meanwhile, want to make your idle cash work hard for you while the interest rates remain above the 5% level? Here are your next best moves.
Cash management solutions on the Endowus platform
Here are the key money market, liquidity, and fixed income funds available on the Endowus platform for Hong Kong investors to consider:
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
Why do people invest in money market funds?
- Maintaining an emergency fund: Life is full of uncertainties, and having a liquidity fund can be a personal safety net to get through any unforeseen emergencies, such as a period of unemployment or an unbudgeted large expense. The general rule of an emergency liquidity reserve is about 3 to 6 months of monthly expenses. The accessibility and flexibility of money market funds make them a good option while not having to sacrifice yields.
- Short-term investment/life goals: Money market funds could be useful for short-term goals such as saving for a vacation or wedding. It is important to ensure the investment holds its value over a shorter time period.
- Parking of assets: Money market funds are also good vehicles to park or transfer assets when you are deciding on how to deploy your funds for the longer term. We do not recommend money market funds as the investment vehicle for your long-term wealth goals. Although their stability might be appealing in the short run, over the long-term their returns would be much lower than stocks and bonds.
The smart and flexible way to earn more on your cash
Looking to supercharge your cash savings? The HSBC Global Money US Dollar, with a net yield of 5.27% p.a.*#, could be a great addition depending on your needs and objectives. You can add it to your portfolio by following these steps.
If you’re interested in model portfolios, CashUp - Simple is another good option, with a current net yield of 5.4 - 5.6% p.a.*#, CashUp - Plus is available as well for investors who are willing to take more risk relative to the CashUp - Simple solution. Critically, Endowus offers our cash management solutions at fees of just 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 or savings account. To get started with Endowus, click here.
*As of 31 July 2024. Net yield after deducting fund-level fees and Endowus access fee, and adding back rebates. Source: Endowus Research and HSBC Asset Management.
# Yields are not equal to the actual return. Not guaranteed returns. Past performance does not indicate future performance.
Read more:
- How to choose between money market funds
- Endowus Fund Smart — Most Popular and Best Performing Funds of 2023
- Webinar: Supercharge your cash in a 5% interest rate environment
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Risk Warnings
Investment involves risk. Past performance is not an indicator nor a guarantee of future performance or returns. Projected performance or returns is not guaranteed to materialise. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested.
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General risk warnings relating to collective investment schemes
Before making an investment decision, you are reminded to refer to the relevant prospectus/ offering document for specific risk considerations and related fees and charges.
Funds are not a bank deposit and not capital guaranteed, and is subject to investment risks, including the possible loss of the principal amount invested.
Some of the funds also involve derivatives. Do not invest in them unless you fully understand and are willing to assume the risks associated with them.
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Complex Products
Some of the funds contained in this article are complex products and investors should exercise caution when investing in these products. Though these products have been authorised by the SFC, authorization does not imply official recommendation. SFC authorization is not a recommendation or endorsement of a product nor does it guarantee the commercial merits of a product or its performance.
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