Updates

The outcomes of November’s election have caused general unease around market volatility for many Americans. You are not alone as you think through how to protect your retirement portfolio and other savings, especially given the economic predictions post-election.

The Federal Reserve has been making concerted efforts to tame inflation with several rate cuts over the past year, and it seems to be on the verge of pulling off the “soft landing” that had once seemed unlikely. The economy has been strong on paper, with the rate of inflation nearly back to normal and a low unemployment rate at around four percent.

Now, post-election, inflation takes center stage as experts speculate on the outlook of the economy given the incoming president’s proposed policies. This shifting dynamic creates opportunities for consumers to lean into stability in post-election uncertainty and find stable yet competitive rates for their savings.

Why Long-Term CDs Could Be A Smart Savings Strategy Post-Election

While it is generally not recommended to overhaul your investment strategy based on election results, it may be a good time to consider more stable, high-yield options in this time of economic uncertainty.

There is a relatively optimistic outlook on the certificate of deposit (CD) market. Historically, higher inflation leads to higher interest rates. And with the yield curve beginning to flatten, consumers may see better returns with longer terms. This provides savers with an opportunity to navigate the shifting economic landscape, as long-term CDs emerge as a reliable and strategic savings tool.

With the Federal Reserve signaling rate cuts and short-term rates likely to mirror the Fed funds rate, locking in a higher long-term CD rate now can protect against future declines. In the United States, Treasury rates are the index which fixed income yields and term deposit APYs are measured against. The spread is not fixed but over time, whichever way Treasury rates move, fixed income yields and term deposit APYs usually follow. The 6-month Treasury rate as of Friday, November 22 was at 4.46% and the 1-year Treasury rate at 4.42%, suggesting the market expects rates to fall in the coming months. By securing a long-term CD, savers can lock in today’s higher yields while sidestepping future uncertainty. 

Currently, there’s little difference between the 1-year and longer-term rates (up to 7 years), creating an attractive environment for savers looking for stability. The implicit market prediction is that rates will decrease in the near term before gradually increasing in years 4-5 and beyond. But with today’s unpredictable political climate, long-term CDs as a safe strategy for savers to weather economic shifts while earning predictable returns.