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With short-term interest rates at their highest levels in almost 20 years, we understand the allure the safety of Certificates of Deposits (CDs) and Money Markets can provide, offering seemingly unbeatable short-term returns. We believe that these are great temporary investments for short-term liquidity needs.

However, the chart below reveals a compelling narrative to look beyond the comfort zone of CDs and Money Markets. History shows us that other asset classes such as U.S. Intermediate-Term Bonds, U.S. High Yield Bonds and the S&P 500 Index have significantly outperformed CDs in the 12-month periods following peak interest rates. This pattern repeating across various economic cycles suggests that investors who focus solely on the short-term may miss out on substantial growth opportunities.

With the Federal Reserve potentially done raising interest rates, history has shown investors may benefit from moving out of money market funds into longer-term investments. Short-term instruments have their place, but we believe a balanced portfolio that taps into broader market’s potential often stands a better chance at achieving long-term financial goals.

By Ryan Zywotko, CFA, CMT

Director of Investments