The Federal Reserve cut interest rates by 25 basis points (0.25%) at its September 17th, 2025 Federal Open Market Committee (FOMC) meeting, with additional cuts signaled for October and December.
How does this impact your portfolio?
Investors have benefited from higher short-term interest rates by investing in money market fund balances, a change of pace for most of the post global financial crisis environment.
Money Market Funds, as defined by the SEC, “Money market funds are a type of mutual fund that invest in liquid, short-term debt securities, cash and cash equivalents.” They are typically invested in short term securities and have the potential to offer higher yields relative to other cash products. These investments are similar to a savings account but are not bank products. Money Market Funds | Investor.gov
Individuals invest in money market funds for a variety of reasons: saving for a down payment on a house, building an emergency fund, or setting aside cash for an upcoming vacation to name a few.
Money market funds will still find their place within a diversified portfolio given their considerations to safety and liquidity. However, you could see some investors reposition assets held in money market funds to other sectors of the market as the Fed Funds Rate falls. Such repositioning may provide tailwinds to certain asset classes such as equities and bonds.
This is a good time to talk to your advisor. Revisit your goals. And make sure your cash is allocated appropriately for those goals, even in a falling-rate environment.
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