Kristin Bartlow

Financial Advisor, Managing Director

Creating customized financial plans and managing investment portfolios for Bay Area families, entrepreneurs and retirees.


June 6, 2024
Kristin Bartlow

How Long Will We See a Yield On Cash?!

Our economy has certainly been through the wringer these past few years thanks to the onset of COVID-19 coupled with geopolitical upsets, supply chain issues, and other global challenges. But in 2024, we appear to be trending toward a period of recovery and correction, proving once again just how resilient our markets and economies can be in the face of adversity.

Of the economic challenges we’ve recently experienced, both high inflation and high interest rates appear to be sticking around longer than expected. This has led to unusual conditions for investors, like high yields on cash and cash equivalents.

Let’s quickly recap why interest rates rose to where they are today, and what that means for investors.

Why Are Interest Rates High?

Over the past 60 years or so, the average rate of inflation has fluctuated around 3.8%.1 By comparison, for the 10-year period between 2012 and 2021, inflation dropped to an average of 1.88%.2 This is significant, indicating that prior to recent high inflation, investors and consumers were accustomed to virtually no inflation (or very, very low inflation and minimal cost of living adjustments).

When inflation jumped to 9.1% in 2022 (a 40-year record high), the Federal Reserve began the process of raising interest rates.

Generally speaking, as interest rates rise, inflation cools—rising rates tend to slow down spending, which in turn keeps inflation under control. Aside from controlling inflation, rising interest rates have had other major impacts on the economy and markets. Namely, rising rates cause bond prices to drop, and they also lead to higher yields on cash equivalents (more on this in a minute).

The Federal Reserve has seemingly stopped raising rates for now, but they haven’t begun to drop them either. While both interest rates and inflation feel elevated at the moment, keeping a historical perspective in mind is important. The measures being taken by the Federal Reserve are intended to move us toward a more stable economic position, which very well may no longer reflect the pre-Covid low-rate, low-inflation environment.

How Interest Rates Have Impacted Cash Returns

As mentioned previously, when interest rates rise, cash equivalents (like money market funds) and cash (like high-yield savings accounts) may earn higher yields. Today, it’s not unusual to see returns of around 5% or even higher. This is significant, considering cash does not historically yield returns that outpace inflation.

While some investors and economists predicted that rates would begin dropping in 2024, the Fed has chosen to stay steady so far—meaning rates are (for the time being) remaining steady as well. As a result, investors are continuing to enjoy elevated returns on cash.

Keep in mind, however, that these current economic conditions could (and likely will) change quickly. 

How Interest Rates Have Impacted Mortgages

Whether you’ve been home buying in recent years or just watching the news, you’ve likely been following along on the wild ride mortgage rates have taken. From the historic lows of 2-3% in 2020 and 2021 to the sharp rise to today’s average of around 7%, the real estate market has been anything but ordinary since the onset of COVID-19.

But again, let’s look at this from a historical perspective. In 1981, 30-year mortgage rates hit a historical high of 18.39% (which is, notably, a far cry from today’s rates). And what’s really important to consider is that the average 30-year fixed mortgage rate over the past 50 years has been 7.73%.3

Yes, following the financial crisis of 2008, we did enjoy relatively low mortgage rates—which can make it hard for many homebuyers (especially younger ones) to grapple with today’s rates. Yet, historically speaking, they’re right on target.

I do want to acknowledge that rates aside, today’s homebuyers are experiencing a number of other challenges, including low inventory and rapidly rising home costs. However, in terms of rates, putting off your home search in hopes of lower rates in the future may not yield the results you’re hoping for, as this very well could be the “new normal” for the foreseeable future.

Should You Change Your Investment Strategy in Response to Rising Rates?

When you see an opportunity to earn attractive returns with virtually no risk (5% in money market funds, for example), it can be increasingly tempting to move your money around, or otherwise forego your investment strategy. But I want to caution you against making any sudden movements based on short-term conditions because they could have long-term implications.

For example, if you already have cash you’d like to spend over the next several years (say on a new car or house), it might make sense to keep it in a high-yield savings account or money market account. That way you’re still taking advantage of that 5% yield while maintaining the necessary level of liquidity. However, choosing to move a large portion of your portfolio into a money market account solely in response to today’s high-rate environment would be a risky and short-sighted move, especially if it involves selling off stock or otherwise triggering a taxable event.

I like to remind my clients that time in the markets is so much more important than timing the markets, and today’s rate environment is a great example of that. Try to resist the urge to make quick or impulsive decisions, and stick instead to your long-term investment strategy. Your portfolio is built to outlast temporary fluctuations in the market, and it’s based on your unique needs and goals. Straying away from those strategies now could have lasting effects or otherwise impact your ability to achieve your long-term goals.

I’ll leave you today with a ‘Yogism’ by New York Yankees Hall of Famer, Yogi Berra – “A nickel ain’t worth a dime anymore.”


1 Inflation rates in the United States of America

2 Is Inflation High Compared To Years Past? Breaking Down Inflation Rates By Year

3 30-Year Fixed Rate Mortgage Average in the United States



Financial Advisor, Managing Director

Kristin is a long-time resident of the Bay Area and has helped hundreds of clients achieve the financial futures they dreamed of. As an experienced financial planner, Kristin speaks the complex language of equity compensation, charitable giving and tax liabilities. She’s devoted to her client base of families and individuals in their 30s, 40s and 50s, knowing that the decisions they make now will have a deep impact on the future they want.



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