While an imminent Federal Reserve rate cut should give equities a boost, sinking interest rates also means some of the sweetest deals rewarding steady savers are coming to an end.

Over the past few years, high-yield savings accounts and other cash equivalents, such as money market funds, offered investors an awesome deal: You could earn a steady 5% return in cash without the risk that comes with volatile equities. That meant crypto bros and day traders had to come to terms with the fact that their cautious peers were making more from sitting in a basic savings account than they were refreshing FinTwit every 30 seconds.

But now, with interest on high-yield accounts poised to fall as the Fed cuts rates, the tables are turning. While rates won’t all come crashing down at once, the juice from cash accounts has probably already been squeezed, which means it’s time to figure out where to invest next.

Get off the sidelines

High-yield savings accounts are a great way to protect your rainy day fund from inflation, and financial advisors across the board recommend keeping about three to six months of living expenses in cash. If you’re saving for a big expense that’s still a few years away, such as a down payment for a home, for example, the pros say that funds are best kept in bonds or CD ladders.

For the long run, right now is the perfect time to lock in longer-term yields from investments like Treasury bonds, according to analysts, in order to secure rates before the Fed announces cuts on Wednesday.

But while it’s tempting to park your hard-earned money in the safety of fixed income, remember that being too afraid of risk can be almost as harmful as taking on too much risk. Cash returns are about to fall back down to earth, and staying on the sidelines means you might miss out on the power of compounding interest in the stock market.

“In addition to managing cash flows for short-term expenses, investors should hold a portfolio that aims to meet their financial objectives over a lifetime,” explained Solita Marcelli, CIO Americas at UBS, in a note today. “The focus, in our view, is to produce consistent growth and income to ensure that their lifetime spending needs will be met, even if there is a stretch of volatility or poor market returns.”

While your portfolio is yours to design, be aware that in the years to come, you won’t be earning the same risk-free returns in cash that you’ve recently enjoyed. While stocks are volatile, they pack a punch over time. So dive back into equities, the water is warm.—LB

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🟢 What’s up

• Intel gained 6.36% on the news that it has secured $3.5 billion in grants from the Pentagon.
• Oracle rose yet another 5.12%, making co-founder Larry Ellison the second-richest person in the world thanks to its recent surge.
• Alcoa climbed 6.09% on the news that it will sell its stake in a joint venture with Saudi Arabia Mining Co. to the tune of $1.1 billion in stock and cash.
• Bausch + Lomb Corp popped 14.66% on a report from the Financial Times that the eyewear company is considering selling itself to get out from under a massive debt load.
• Nuvalent soared 28.27% on impressive results from Phase 1 trials of its new cancer treatments.

What’s down

• Apple fell 2.78% just a few days before its big iPhone 16 launch on Friday thanks to reports that demand for the new phone may be lower than anticipated.
• Walgreens Boots Alliance sank 2.06% after it agreed to pay $106.8 million for charging the US government for prescriptions it never filled.
• Yelp tumbled 3.03% thanks to Bank of America analysts initiating their coverage of the reviews website with a bearish “underperform” rating.
• Trump Media & Technology Group gave up some of its recent gains, falling 3.84% only a few days after soaring on the news that former President Donald Trump won’t sell his shares of the company.

The energy sector has been on a roller coaster ride this year due to ongoing geopolitical instability and falling demand thanks to an economic slowdown in China.

After breaching about $87 per barrel back in April, crude oil futures have declined over the end of the summer, falling 9% in the past month and dropping about 16% in the past six months. While OPEC+ has course-corrected its policy to adjust the supply and demand equation, oil futures have still continued to trend downward over the past month.

Gas prices have followed oil’s decline. In fact, the price of gas has have dropped 16% over the past year, according to research from Jefferies—at the exact same time when the price of many other staples like groceries have been rising. The average price of gas across the US last week was the lowest it has been since mid-February.

In a note from Jefferies, analysts led by Andrew Greenebaum argued that cheaper gas prices lead to more disposable cash for consumers to spend in other areas of the economy—leading to a boost for major indexes.

Since 1991, the 13 previous times that gas prices declined like this, the S&P 500 jumped 18% on average over the next 12 months, according to Jefferies. The Nasdaq 100’s gain outpaced the S&P 500’s over the same time period, while the S&P Retail Select Index specifically far outperformed the S&P 500, indicating that the cheaper price of gas has proven to be a boon for consumer spending.

While all eyes are on the Federal Reserve right now, maybe rate cuts won’t be the only factor boosting the market in the coming months.—LB

• There’s an ETF for everything these days, but the good ones are hard to find.
• On a completely unrelated note, the first private credit ETF is on its way.
• DirectTV and Dish are in talks about a potential merger. The combined company would be the largest pay-TV service provider in the US, and a team-up was already shot down by the Justice Department back in 2002.
• Speaking of TV, Disney and DirectTV settled their beef this weekend, letting viewers enjoy some sweet, sweet football.
• Meme stocks come and go, but the retail investors who pushed Palantir all the way to inclusion in the S&P 500 have stuck around and reaped the rewards.
• It’s not just your imagination: Holiday deals from retailers like Target and Amazon are dropping earlier than ever this year as companies try to recuperate from lower consumer spending.

Hear that? That’s the sound of crickets on the earnings front, with no major announcements dropping tomorrow morning or afternoon.

Instead, turn your attention to US Retail Sales, a monthly report from the Census Bureau that provides a detailed insight into the state of US consumer spending. Retail sales have withstood the ill effects of high inflation surprisingly well: Last month, retail sales rose by 1% month over month, and 2.7% year over year. But earnings calls from retailers have warned of a slowdown in retail sales as consumers pinch their pennies, and this report will shed some light on the truth of the matter.

We’ll also get some info on the real estate market with the Home Builder Confidence Index. Confidence sank last month to 39, its lowest point since December 2023, as home builder sentiment suffered from a housing market hobbled by high interest rates and high prices. Considering that interest rates will likely be cut this week, you’d think that home builder confidence would skyrocket, but economists think it will barely budge until mortgage rates start to drop.

We’re all trying to figure out exactly where the Federal Reserve will land on rate cuts, and we could use your help.

Right now, the betting odds are on a 50 basis point cut, but it’s still anyone’s guess what J. Pow and his motley crew of miscreants will do on Wednesday. Well, we don’t want just anyone’s guess—we want your guess.

Click here to take a quick poll on how deeply the Fed will cut interest rates this week, and let’s see if Brew Markets readers are prophetic or flat-out wrong.