Staying in cash while waiting for the Fed to raise interest rates requires a large sacrifice in income. It’s important to remember that the losses incurred in a rate rise are mainly temporary, rather than permanent. And historically, the average price drop associated with a one-percentage-point rise in short-term interest rates has been relatively modest. For a large proportion of investors, the risk-reward tradeoff will favor keeping cash balances low and enjoying the benefits of higher income generation.
Read here the full analysis recently conducted by our Chief Investment Officer, Martin Fridson.