Cash & Liquidity Management
Published  7 MIN READ

Hitting the Sweet Spot: Macro Uncertainty and the Ultra-Short Solution

In the current uncertain macro environment, it is tempting for treasurers to hunker down in their short-term investment comfort zone, namely money market funds (MMFs). Nevertheless, if they are prepared to step out into an ultra-short-duration strategy, investors can potentially garner returns over and above those offered by MMFs, while remaining in a low-risk solution.

Eleanor Hill, Editor, TMI (EH): How is today’s macroeconomic uncertainty impacting short-term cash investors?

Neil Hutchison, Lead Portfolio Manager for Managed Reserves, Europe, J.P. Morgan Asset Management (NH): Besides the ongoing macro shocks we are all familiar with, such as the US-China trade war and the UK-EU Brexit situation, one of the biggest uncertainties facing short-term investors is interest rates. When the Federal Reserve (Fed) made its first rate cut since 2008 in July this year, it was described as an ‘insurance cut’ of 25 basis points.

But investors were left wondering whether that cut was enough to prolong this stage of the cycle and continue expansion? Or whether it was insufficient, and recession was on the cards? The Fed made a second rate cut of 25 basis points in mid-September, throwing investors into greater uncertainty. And given that members of the Federal Open Market Committee are divided on what action the Fed should take moving forward, treasurers are understandably on edge.