Cash investment strategy remains favored after the Fed rate cut, but reinvestment risks are emerging

After the Fed rate cut, cash investment strategies remain popular, with money market fund assets exceeding $6.3 trillion. However, Wells Fargo analysis points out that investors face reinvestment risks and may find it difficult to find a 5% return opportunity without increasing risk. It is recommended that investors reduce cash holdings and shift towards medium-term fixed income investments, such as residential mortgage-backed securities and municipal bonds, to lock in coupon income and potentially benefit from asset price appreciation. Research shows that the returns on high-risk assets far exceed cash alternatives