Silver lining from the Fed’s pivot: Here’s a middle ground for safety, liquidity and yield

THE investing world has found no shortage of risks in 2022: the largest commodity moves in a decade; the threat of escalating conflict on the European continent; widespread volatility among risk assets; and the first 75 basis-point Fed hike in 28 years.

Under such an environment of profound uncertainty, it is natural for risk-averse investors to seek the safety of cash to preserve both capital and liquidity. Yet with the prospect of the highest inflation in 40 years, it is difficult to imagine that cash would register positive real returns over the longer run.

Caught between a rock and a hard place, most income-seeking investors are forced to choose between (a) the higher yields in riskier pure-credit funds to beat inflation, or (b) capital certainty and liquidity but lower returns of cash or deposits.