Should You Hold Cash or Chase Long Bonds?

There’s a tug-of-war between investing in cash and long duration bonds in today’s interest environment. The longer-end of the yield curve may look more appealing since anticipation is building about interest rate cuts. Morningstar’s economics team and market watchers are predicting the Federal Reserve will lower rates more than once in the final months of 2025. What may matter more is the time horizon for your financial goals. Morningstar Inc Portfolio Strategist Amy Arnott has examined why for some investors, sticking with cash is a less risky and better approach.

Oracle’s transformation is serving as a reminder that big opportunities to invest in artificial intelligence still exist. The database provider’s expansion into being a cloud provider recently sparked a 42% jump in its stock price. That caught the attention of Dan Kemp, chief research and investment officer at Morningstar Investment Management Europe. The author of the Markets Brief says one of the big takeaways is that stocks like Oracle are making good use of AI, and investors should look beyond the popular names. 

In next week’s Markets Brief, Dan will dive into how the Federal Reserve’s quarter-point rate cut feeds into changed opportunities and risks in the broader markets for the long term.

On this episode:

Let’s start with an explainer. What is cash? 

Interest rates are a popular topic now. The Federal Reserve is expected to announce its rate decision this afternoon. Morningstar’s economics team and market watchers are predicting lower rates. Should bond investors swap short-term Treasury bills for 20- to 30-year Treasury bonds? 

Talk about why it could be a mistake for bond investors to assume the Fed will cut rates that match predictions.

In your article, Why Cash Is Still King for Short-Term Goals, you discussed a couple of reasons why cash yields still look good. Can you explain?

What are some of the trade-offs when holding cash? 

Where are best places to invest cash if you need the money sometime within the next 12 months? 

Are there any places where people might not want to keep their cash holdings?

And what about goals with a time horizon that’s a little bit longer—like two or three years? 

What’s the takeaway for investors weighing whether to take on the risk of long-duration bonds?

Read about topics from this episode.  

Why Cash Is Still King for Short-Term Goals

7 Reasons to Stop Freaking Out Over the Fed

How to Use Taxable Bonds in a Portfolio

The Best Bond Funds

How to Use Cash in a Portfolio

The 4 Rules for Cash: How to Manage Your Money the Smart Way

Markets Brief: Can a Bumper Fed Rate Cut Give Stocks Another Boost?

What to watch from Morningstar. 
What You Need to Know Before Choosing a Stock ETF

Investing in AI? Here Are 6 Undervalued Stocks for Buy-and-Hold Investors

Do Dividend Stocks Benefit From Non-US Revenue?

This Classic Investment Strategy Is Still Alive in 2025

Read what our team is writing.

Amy C. Arnott

Dan Kemp

Ivanna Hampton

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