Many People Are Waiting for a Rate Cut: What’s Everyone’s Take?
My deposit and savings accounts mature next month, so I keep looking at where to put the money. There’s constant talk of a rate cut, but when I actually look at inflation and the exchange rate, it seems like they might not be able to cut easily.
For now, I’m thinking of splitting it half into a 1-year deposit and half into short-term bonds. What is everyone else doing?
8 answers
Got a source? Is there any solid evidence for the rate cut besides what the Fed has said?
This is spot on lol. Everyone just waits around for a rate cut, but by the time it actually happens, deposit rates have already plummeted into the 2% range, and they end up regretting it—it’s the same pattern over and over.
True, splitting it half and half is the unwritten rule lol. If you only bet on one side, it messes with your head.
I don't agree. The excuse that they can't cut rates because of inflation and the exchange rate is the same thing they were saying last year, and in the end the direction is already set. But since no one knows the timing, splitting it up like now seems to be the answer.
Last year I went all-in, and then with six months left to maturity, I saw rates had risen even more, which felt a bit unfair. Since then, I've been splitting it into 3-month/6-month/1-year buckets and rolling them. If you stagger the maturity dates, it's easier to rebalance no matter which way rates move. By the way, for short-term bonds, individual bonds or MMFs are more convenient than ETFs because you don't have to worry about redemption fees or premium/discount-to-NAV issues.
Putting half into short-term bonds is a good move, but it makes a huge difference what duration you're targeting. Short-term bonds with less than a year to maturity get almost no benefit from rate cuts. If your goal is to bet on rate cuts, you should hold somewhat longer duration; if it's just a parking spot for cash, you don't need to bother with bonds at all. You need to decide your objective first.
Well, that's a bit... Looking at inflation and exchange rates, the fact that they can't cut rates for now—if you think about it the other way around—could mean now is the last chance for high-interest deposits. If you wait for a cut while holding cash, aren't you just losing out on interest in the meantime?
Same here. These days nothing feels certain, so when a term matures, I just park it in a high-yield savings account, spend a few days thinking it over, and end up opening another time deposit ㅠㅠ.