How to Position Your Portfolio for 2025 Rate Cuts

Cash felt safe, but the tide’s turning

Cash felt safe, but the tide’s turning. If you parked a chunk of your portfolio in money market funds this year, you weren’t alone, and you weren’t wrong. Cash looked unbeatable: low drama, instant liquidity, and 5%-ish yields that showed up every month without the heartburn. The scale was wild. According to Investment Company Institute data, U.S. money market fund assets topped $6 trillion in 2023, yes, trillion, which tells you just how many investors chased yield in cash while policy rates were high. I did some of that myself for short-term needs (no shame in that).

But here’s the catch. When the Fed starts cutting, like we’re seeing into late 2025, the math flips. Cash yields are tied to short-term policy rates, so they reset the fastest on the way down. Bonds, especially the longer-duration stuff, typically move the other way: when yields fall, prices rise. Your return drivers literally invert. The thing that worked perfectly earlier this year starts losing steam, quietly, while the assets you ignored for being “too boring” (or too volatile, depending on the week) start pulling ahead.

I know that can feel counterintuitive. Cash finally paid you to wait, and now I’m saying don’t wait too long. I get it. But cycles turn. The playbook that worked when cash was king isn’t the same one you want when the Fed is easing and growth, inflation, and term premiums are shifting. And yes, I’m generalizing a bit, there are always idiosyncrasies by sector and credit quality. But directionally, this is how the machine works.

When policy rates fall, cash rates fall first. Duration, both in bonds and in equities via valuations, does the heavy lifting.

Here’s what we’ll cover next, with a practical lens for Q4 2025 positioning (and where I’ve tripped in past cycles):

• Cash: Why yields compress fastest and how to triage between staying liquid vs. laddering T-bills. What to expect from 7-day yields as cuts accumulate.
• Bonds: How duration exposure can turn into capital gains when policy rates and front-end yields drop, and where credit risk helps, or hurts, when growth cools.
• Stocks: Why falling discount rates can support multiples, but earnings still matter (I almost said “equity duration,” which is just a fancy way of saying long-cash-flow companies feel more rate-sensitive).
• Real assets: Which inflation-linked and cashflowing assets tend to hold up as rates fall, and where financing costs create winners and losers.

And we’ll be clear about trade-offs. There’s no perfect switch. Liquidity has value. Taxes matter. Sequence risk matters if you need cash in the next 6-12 months. But if your plan is multi-year, and the Fed is easing into late 2025, clinging to last year’s cash playbook can quietly cost you. The goal isn’t to abandon safety, it’s to right-size it before the carry you loved fades and the market’s next driver takes the wheel.

Where to put “safe” money now: ladders, barbells, or both?

If you’ve been parked in T‑bills and money markets, you had a great run. But as the Fed cuts into late 2025, the front-end carry you loved compresses fast, and reinvestment risk sneaks up. The pivot isn’t to get cute, it’s to shift part of that cash into a setup that likes falling policy rates without betting the farm.

Start with a simple 1-5 year ladder. A mix of Treasuries or high-grade corporates (A/BBB) staggered across 1, 2, 3, 4, and 5 years can do two things: (1) protect you if cuts keep coming, since you’ve “locked in” yields beyond cash; and (2) capture roll-down as the bonds age and move into richer parts of the curve. Historically, roll-down contributes a non-trivial slice of return when curves are positively sloped. It isn’t magic, it’s math. For context, the long-run average investment-grade default rate is about 0.1%-0.2% per year (Moody’s, long-run history), so credit risk in high-quality ladders is low, though not zero. And for high-yield context, the long-run global HY default rate runs ~4.1% (Moody’s long-term study), so keep the core ladder clean.

Or build a barbell. Keep a real cash sleeve for optionality, 3 to 6 months of needs, maybe more if your life is variable, and pair it with intermediate Treasuries in the 5-10 year zone. Why? If growth cools and the market leans into more cuts, that intermediate duration gives you price upside that cash can’t. If growth holds up and cuts are shallower, your cash doesn’t get dinged and you can redeploy. This is the “don’t over-commit” way to be rate-cut-friendly. For credit spread context, the ICE BofA US High Yield OAS spent much of 2024 around ~350 bps; that’s not distressed pricing. If spreads are tight like that again, the barbell’s duration leg (Treasuries) is often the more reliable shock absorber than reaching down in credit.

Quality first. Add risk on your terms, not FOMO’s. Stick to Treasuries and IG as your core income base. If you want a little extra carry, add a measured sleeve of short high-yield only when you’re paid for default risk, say when spreads are closer to their long-run median or higher. If spreads compress toward cycle tights, the upside skew narrows; you’re taking equity-like downside with bond-like upside. Not my favorite trade-off in late-cycle cuts. For reference, S&P and Moody’s both showed the speculative-grade default rate running near 4-5% in 2023-2024; if that drives up recovery uncertainty, insist on yield that compensates you. I remember a Moody’s note putting 2023 around the mid-4s; if I’m off by a tenth, it’s close.

Mind call risk on preferreds and callable bonds. When rates fall, issuers refinance. That’s great for credit risk, lousy for your forward yield if the bond gets called near par. Plenty of bank preferreds were redeemed in the 2020-2021 easing window, and if we repeat a milder version, you don’t want your highest coupon positions disappearing just as you need them. Read the call schedule. Price to the worst, not just to maturity. If your YTC (yield-to-call) is a lot lower than YTM, assume the call.

One more practical note. Taxes and liquidity matter, especially if you’re spending from the portfolio. If you need cash inside 6-12 months, leave it in cash. No heroics. But for multi-year money, a 1-5 year ladder or a cash/intermediate barbell both fit a how-to-position-portfolio-for-2025-rate-cuts mindset: you keep dry powder, you add duration where it’s most convexity-rich, and you stop letting the reinvestment risk eat your lunch quietly.

My quick recipe: 30-50% true cash for near-term needs and tactical shots; 30-50% in a 1-5 year Treasury/IG ladder; 10-30% in 5-10 year Treasuries. Add a small, rules-based sleeve of short HY only when spreads actually compensate you. Re-check quarterly as the curve and cuts evolve. Simple, boring, repeatable.

And yeah, there are gray areas. Curves can whipsaw. Cuts can pause. Inflation can re-accelerate, wouldn’t be the first time. That’s why you barbell some cash, keep the core high quality, and let roll-down and duration work for you instead of against you.

Duration is back: making the curve work for you

Duration is back: making the curve work for you. Rate-cut cycles usually come with curve shape-change. When policy rates start falling, the front end moves first and the curve often steepens as growth slows and the market prices a terminal floor. Historically, the “belly” tends to pick up the baton early: intermediates benefit as the 2-7 year zone reprices away from peak policy while the very long end can be held back by term premium, issuance, or inflation risk that doesn’t vanish overnight. I start in the 5-7 year pocket before I even think about 30s. I’ve learned that the hard way more than once.

Over-explaining a simple idea for a second: duration is just sensitivity. A 6-year duration asset should gain roughly 6% if yields fall 100 bps (all else equal). A 30-year with ~20 duration could pop ~20% on the same move. Sounds great. Except your mark-to-market swings are 3-4x bigger. So the point: size the exposure you can sleep with, not the one that looks best in a spreadsheet.

Where I’m putting risk this year (and where I’m not):

• Add the 5-7 year belly first. The 5-year Treasury’s effective duration is usually ~4.5-5.0; the 7-year is ~6.5-7.0. A 50 bp rally can mean ~2-3.5% price gains, enough to matter, not enough to blow up your monthly P&L.
• Keep core Treasuries as your shock absorber. They’re the ballast when credit spreads widen. Then layer IG corporates for carry once you’ve set the duration with rates. A rough rule I use: 70-80% of your duration dollars in Treasuries, 20-30% in A/BBB corporates at reasonable OAS. If spreads are tight, I wait. Boring is fine.
• Tax location matters. Put most of the duration in IRAs/401(k)s to avoid taxable price gains from rallies. Keep the shorter, higher-coupon stuff in taxable accounts. It’s not fancy, it’s just after-tax math.
• Be deliberate on mortgages (MBS). When mortgage rates drop, prepays can jump, duration shortens, and your convexity gets weird right when you want it steady. I prefer agency MBS when spreads are wide to their own 5-year history and pass when they’re tight. Negative convexity isn’t your friend during fast rallies.

Quick math that helps sizing: if your target portfolio duration is 4.0 and your core ladder is at 2.8, a 10% sleeve in 7-year Treasuries (duration ~6.5) and a 10% sleeve in 10-year Treasuries (duration ~8.5) lifts you close to target without reaching for 30s. A 100 bp rally with that mix could add ~3.5-4.5% total return before fees; a 50 bp back-up could cost ~1.8-2.3%. You feel it, but you’re not getting tossed around.

Okay, now I’m a little excited: rebal rules beat hero timing. Every time. Set ±20% bands around your target duration and automate the add/trim. Example: target duration 4.0? Add belly exposure if you drift below 3.2 after a selloff; trim if you drift above 4.8 after a rally. Same rule for credit OAS if you want to be fancy: add IG when OAS widens 40-60 bps from your base, lighten when it compresses back.

Example sleeve I use: 50-60% Treasuries (ladder + 5-7yr belly), 20-30% IG corporates, 0-10% Agency MBS only when spreads are meaningfully wider, 10-20% cash/T-Bills for optionality. Rebalance quarterly, or when bands break.

One more realist note on market context: earlier this year we saw term premium wobble as Treasury supply stayed heavy and inflation progress came in choppy. That combination can mute the long bond’s response even as the front end rallies. Which is the whole case for belly-first duration: you catch the policy move, keep your volatility survivable, and still leave room to scale out to 10s later this year if the data finally cooperates.

Equities when money gets cheaper: tilts that actually pull their weight

Rates down, breath a little easier, sure. But keep the humility hat on. Cuts help financial conditions, yet they don’t rewrite income statements overnight. Here’s what’s earned space in my playbook when the Fed is easing (or markets are pricing the path there, as they’ve flirted with on and off this year):

• Small caps and domestic cyclicals: Lower discount rates and easier credit usually loosen the vise for smaller companies. A big reason: revenue mix and financing. FTSE Russell data show the Russell 2000 derives roughly 75-80% of sales from the U.S. (varies a bit by year), versus closer to 60% domestic for the S&P 500. When the dollar chills and bank lending standards ease, that local exposure helps. Size the bet, don’t swing for the fences, think a +2-5% overweight to small caps or domestically tilted cyclicals inside a diversified core, not a wholesale style reboot.
• Quality still matters, more than usual: Cheap money doesn’t rescue weak balance sheets into a slowdown. The long-run data back this up. The Quality-Minus-Junk factor (Asness, Frazzini, Pedersen, 2013; updates through the 2010s) shows roughly a 4-5% annualized premium across markets since the 1950s for profitable, low-use, stable businesses. In plain English: prioritize strong free cash flow, sensible use (net debt/EBITDA that can breathe), and consistent margins.
• Dividend growers over high yielders: I like cash return discipline when bond proxies are re-rating. Ned Davis Research’s classic study (1973-2022) shows Dividend Growers & Initiators ~10% annualized, versus Non-Payers ~5% and Cutters negative, with lower volatility for growers. That pattern held across multiple rate regimes. Point is, growth of dividends, not just a big sticker yield, tends to carry better total-return ballast.
• Select long-duration tech, carefully: Yes, lower real yields can float multiples. But the fulcrum is earnings durability. Own cash engines, subscription models with net retention, high gross margins, and actual GAAP profitability. Skip the science projects. During 2020-2022, high-duration, no-profit cohorts showed the worst drawdowns when real yields rose; cheaper money later didn’t fully bail them out because the earnings never showed up. Same lesson, again.

How I size it in practice? Something like:

Core remains broad beta (S&P 500 or ACWI). Then: +3% Russell 2000 (or a quality small-cap ETF), +2% domestic cyclicals (industrial distributors, regional services), +3-5% dividend growers (an Aristocrats sleeve), and a modest, spread-out allocation to profitable software and semis. Rebalance back to bands when styles overrun their skis.

One personal tell: earlier this year, I sat with a mid-cap CFO who flat-out said, “The first 50 bps helps my confidence more than my interest expense.” That stuck. And it’s why I keep the quality filter glued on, confidence can tighten spreads, but only cash pays coupons.

Risks that trip people up: piling into levered small caps just as growth slows; confusing dividend yield with dividend health; and buying rate-sensitive tech without a handle on unit economics. If you want a quick checklist:

• Small caps: favor firms with positive free cash flow and net use that’s sub-2.5x in cyclical names, sub-1.5x in defensives.
• Dividend sleeve: 5-year dividend CAGR > 5%, payout ratio <65%.
• Tech growth: rule-of-40 consistently > 40 and GAAP profitability or a clear near-term path, stories don’t clear covenants.

And if rate cuts arrive later this year into a still-choppy growth tape, I’d keep the tilt sizes modest and let quality do the heavy lifting. Sounds boring. Works more often than my ego likes to admit.

Hunting income without stepping on rakes: credit, munis, and preferreds

Income gets interesting when cuts show up, because price + coupon starts doing the work for you. But it’s also when folks reach too far and regret it two statements later. Here’s where I’m seeing decent carry that can actually benefit if the Fed trims later this year, and the landmines I’ve stepped on before so you don’t have to.

Investment-grade credit (IG): You’re getting a spread pickup over Treasuries without owning balance sheets that keep you up at 3 a.m. The ICE BofA US Corporate Index option-adjusted spread averaged roughly ~130 bps over the long run, and in 2024 it lived around ~95-140 bps. That’s not heroic, but it compounds. If cuts pull base yields down, price gains can tack on extra. I ladder here, stagger maturities and call dates, so I’m not hostage to one refunding window. And I keep a mix of bullets and make-wholes; sorry, jargon, bonds that mature on a set date and bonds that are harder to call early. Target the 3-7 year belly for most of the exposure, then sprinkle some 10s if you want a little convexity kicker when rates fall.

High yield (HY): Treat it like equity with coupons. Seriously. In 2024, HY OAS ranged roughly 330-450 bps (ICE BofA), which is fine when defaults behave, thin when they don’t. Moody’s put the global spec-grade default rate around 4.2% in Dec 2024, down from the mid-year peak, but still not “free money” territory. If spreads aren’t compensating, I size HY to my drawdown tolerance, position size first, yield second, and bias the higher-quality buckets (BB/B) with shorter duration. If we get a wobble in growth, the CCCs can gap wider fast. Been there. Didn’t love it.

Munis: If you’re in a high bracket, this is where rate cuts help you twice. Lock tax-exempt yield now, let duration do some lifting if base rates slide. Quick math: at a 40.8% federal rate (37% + 3.8% NIIT), a 4.0% AA muni has a tax-equivalent yield near 6.8%, and that’s before state tax dynamics. Default risk is tiny at the investment-grade level; S&P’s long-run study shows a 10-year cumulative default rate of about 0.10% for IG munis (1970-2022), versus roughly 2%+ for IG corporates over similar horizons. Structure matters: I like a barbell, some 1-3 year paper for liquidity and reinvestment optionality, and some 12-20 year bonds for carry and the potential price pop if cuts bite. Watch call schedules; getting called right after you finally find a good coupon is… not fun. And avoid reaching into speculative projects just to grab 40 extra basis points. Not worth it if the cashflows are squishy.

Preferreds/financials: Easing cycles tend to be kind to bank preferreds; spreads compress, and fixed-to-float issues can re-rate as reference rates slip. But extension risk is real: if a preferred isn’t economical to call, you might be stuck past the first call date. Read the prospectus, especially the reset spread and the rate reference (SOFR vs legacy LIBOR fallbacks). Also keep an eye on the rulebook, U.S. regulators signaled in 2025 that the Basel III “endgame” will be revised from the 2023 draft, with some softening on market/operational risk charges. That matters for bank capital stacks and, by extension, preferred supply and call behavior. I lean up-in-quality (GS/JPM/WFC tier, plus strong regionals), diversify issuers, and never let a single preferred line item become a portfolio boss.

Practical guardrails I actually use

• IG ladder: 25% 1-3y, 50% 3-7y, 25% 8-12y; mix 60/40 industrials vs financials. Adjust if your tax situation tilts you to munis.
• HY sleeve: cap at whatever drawdown you can sleep with, e.g., if you can tolerate a 5% portfolio hit in a bad year and HY can drop ~15-20%, size it at 25-30% of that hit.
• Munis: barbell around call dates; avoid big premium bonds unless you’re clear on yield-to-worst.
• Preferreds: favor issues with reset spreads that still look fair if SOFR is 2-3% in a year or two; watch extension math.

Rule of thumb: if you wouldn’t own the common equity on a bad day, think twice about owning the HY or the preferred.

There’s gray area in all of this. Markets don’t pay you for tidy. But if cuts land into this still-messy growth backdrop, these pockets can clip steady income and maybe a little price upside, without stepping on the usual rakes when everyone gets greedy. And yeah, I still carry some cash; optionality is income too, kinda.

Real assets and inflation hedges when rates ease

Lower policy rates tend to breathe a little air back into real assets, but you still have to pick your spots. On REITs: two levers help, lower cap rates support values, and refinancing gets less painful as coupons reset down. Balance sheet matters more than the marketing deck. Per Nareit, U.S. equity REITs carried median net debt/EBITDA near the mid-5x area in 2023 and had weighted-average debt maturities around ~7 years, which means many issuers already termed out the 2020-2021 cheap debt and aren’t forced sellers. If you want cyclicality without the heartburn, I’d bias to sectors with real pricing power: industrial/logistics and data centers. Industrial vacancies rose off the 2022 floor but stayed in the mid‑single digits in 2024, and lease spreads in data center REITs were still double‑digit last year as AI demand soaked up capacity. I walked past a newly-built colo site in Ashburn earlier this year, the chillers were louder than my old Bloomberg terminal, and the point is, demand is tangible, not just a slide in an investor deck.

Listed infrastructure is a two-fer: partial inflation pass‑through plus rate sensitivity. Pipelines and midstream usually have tariff mechanisms indexed to inflation over set windows, and many regulated utilities reset allowed returns on equity periodically. S&P Global Market Intelligence reported average authorized ROE for U.S. electric utilities around 9.6% in 2023, with cases refiled as costs and rates move. When the discount rate drifts lower, long‑duration cash flows re-rate, but you still want balance sheets that can fund capex without serial equity issuance. I keep it boring here: pipes with fee‑based contracts and utilities in constructive jurisdictions.

TIPS are the awkward one in a gentle disinflation + cuts backdrop. If headline and core keep cooling while the Fed trims, plain-vanilla duration can outpace TIPS because breakevens stall or compress. The breakeven math is simple: nominal ≈ real + inflation expectations. In 2024, 10‑year breakevens mostly hovered a bit above 2% while real yields rose; if real yields fall faster than expected inflation rises during a cutting phase, nominals often win the tape. I still keep TIPS, but as an insurance sleeve, not the core bet, think a few percent of portfolio risk, not the whole bond bucket. For context, TIPS were roughly high‑single‑digits percent of marketable Treasury debt outstanding in 2024, so it’s already a niche market relative to nominals.

Commodities? Treat them like a fire extinguisher and a small one at that. Since the 1970s, broad commodity baskets (e.g., GSCI) have shown a positive correlation with inflation, while equities and nominals haven’t. But carry and roll yields matter to returns more than headlines. Energy curves swing between backwardation and contango; your realized roll can be +3-5% annualized in tight markets or a drag when inventories swell, there were plenty of months like both in 2022-2024. Size small (say 2-5% for most diversified portfolios), rebalance on big moves, and avoid loading up on a single sleeve of the curve just because it screens “cheap.”

How to fit this in without turning your portfolio into an octopus:

• REITs: 5-10% of equities, skewed to industrial/data centers and fortress balance sheets. Watch debt maturities inside the next 24 months.
• Infrastructure: 5-10% of equities via listed funds; favor pipelines with fee-based cash flows and regulated utilities with credible allowed ROE reset paths.
• TIPS: 5-10% of the bond sleeve as inflation insurance; keep core duration in high‑quality nominals if disinflation is still the base case.
• Commodities: 2-5% total, diversified basket; be explicit about the roll methodology and accept it’s a rebalance tool, not a P&L hero.

Rule I learned the hard way: own real assets for cash flows and convexity to the macro you fear, not because a chart looked lonely last week.

Tie the bow: a rate-cut playbook you can actually run

Tie the bow: a rate‑cut playbook you can actually run

Here’s the Q4 checklist I’m using with clients and, frankly, my own money. It’s practical, it’s repeatable, and it doesn’t require guessing the next two FOMC pressers.

• Trim excess cash: If you’re still sitting on a mountain of idle cash, scale it down to your real‑world needs (6-12 months of spending for retirees; 3-6 months for earners). Cash felt great when yields jumped, but it’s a fading tailwind once cuts start. I’ve watched too many portfolios stall out here.
• Redeploy into a 1-5 year ladder + an intermediate Treasury sleeve: Build a staggered ladder (1, 2, 3, 4, 5 years) for reinvestment optionality, then add a 20-30% sleeve in 5-10 year Treasuries for duration upside if the curve bull‑flattens. Remember, the Bloomberg U.S. Aggregate fell about −13% in 2022 when duration bit; that convexity works both ways when rates head down.
• Keep a quality‑biased equity core: Stick with profitable, cash‑rich names as your anchor. Then add measured tilts: a small‑cap/cyclical sleeve sized at 5-10% of equities, and a 10-20% allocation to dividend growers inside equities. Quick data point: the S&P 500 Dividend Aristocrats Index dropped roughly −6% in 2022 versus ~−18% for the S&P 500, which is exactly the kind of downside math that helps you sleep.
• Credit where you’re paid: IG and tax‑advantaged munis first: Favor intermediate investment‑grade corporates and high‑quality municipals in taxable accounts. For context, the Bloomberg Municipal Index was down about −8.5% in 2022, painful, but shallower than broad IG credit, and tax benefits did real work for high bracket investors. Be surgical with high yield and preferreds. Know your drawdown math: U.S. HY saw peak‑to‑trough hits of ~−26% in 2008 and ~−21% in early 2020; allocate like you remember those days.
• Use asset location: Put higher‑duration bonds and TIPS in tax‑deferred accounts (the phantom income from inflation accretion can be annoying in taxable), keep munis in taxable, and harvest losses where 2022-2024 left scars. Lots of investors still have carryforward losses from the 2022 bond bear; don’t waste them.
• Set rules, not hunches: Pre‑commit to a rebalance band (say 20% relative drift or 5% absolute on major sleeves). Write two simple playcards: one for slower cuts (stay heavier in ladder, keep the Treasury sleeve; equities: stick with quality and dividend growers) and one for faster cuts (let duration run, modestly add cyclicals/small‑caps, but don’t blow out sizing). And keep a 3-6 month cash buffer for surprises so you’re never a forced seller. That buffer is your behavioral hedge.

Is this perfect? No. Markets are messy, and this year hasn’t exactly been a straight line. I keep catching myself over‑tweaking the ladder because, well, old habits. But the point isn’t to nail every basis point; it’s to stack the odds. A ladder for flexibility, duration for upside, quality for the core, credit where you’re paid after tax, and rules that keep your future self from doing something.. let’s just say, regrettable.

Build the portfolio that doesn’t just chase this year, it survives the next one too. If 2022 taught us anything (−13% Agg, −18% S&P 500), it’s that defense and tax math aren’t afterthoughts. They’re the plan.

Frequently Asked Questions

Q: How do I reposition my cash-heavy portfolio for rate cuts in Q4 2025?

A: Short version: keep your safety net, send the excess to duration. As the article says, when policy rates fall, cash rates fall first, so the easy 5% fades fast. Practical steps I’m using with clients (and in my own accounts):

• Keep 3-6 months of expenses in your money market for true liquidity.
• Shift 20-40% of excess cash into a T‑bill ladder (4, 8, 13, 26, and 52 weeks). Set auto‑roll but be willing to interrupt it if yields drop faster than expected.
• Add intermediate duration: 30-50% of the redeployed cash into 2-3 year Treasuries, and 50-70% into 5-7 year Treasuries or a core bond ETF with duration ~5-6.
• Add a slice of high‑quality credit (A/BBB) for extra spread, sized modestly (10-20% of your fixed income) so you’re not over your skis if growth slows.
• In a 32%+ tax bracket? Consider national/intermediate muni funds; mind AMT and state tax rules.
• Implement over 4-8 weeks to smooth price moves. It’s boring, it works.

Q: What’s the difference between staying in my money market fund vs. laddering T‑bills when the Fed is easing?

A: In an easing cycle, the mechanics diverge. The article notes cash felt great, but the tide’s turning because 7‑day money market yields reset almost immediately as the Fed cuts. A T‑bill ladder locks today’s yield until each maturity, so you slow the drop in income.

• Yield path: Money markets float down quickly; T‑bills hold coupon-equivalent until maturity.
• Reinvestment risk: Higher in money markets; a ladder staggers it.
• Liquidity: Money markets = same day (usually). T‑bills can be sold anytime, but price can wiggle; if you hold to maturity, no price risk.
• Fees/taxes: Money markets have expense ratios; T‑bills have none, and Treasury interest is state-tax exempt (nice if you’re in CA/NY/NJ).
• Admin: Money markets are set‑and‑forget. T‑bill ladders need setup, but most brokers now auto‑roll. I still check auctions because, well, old habits.

Q: Is it better to wait for more cuts before buying longer‑duration bonds?

A: Generally no. Markets front‑run the Fed, so a big chunk of the total return in duration happens before the last cut. I prefer legging in now: split buys over a month or two and use a barbell, some 2‑year Treasuries for flexibility and some 7-10 year for rate sensitivity. If you want a single ticket, target a core bond fund with duration ~5-6 years. If we get an unexpected backup in yields, add another tranche; if yields fall faster, you’ve already got exposure. Simple, not fancy.

Q: Should I worry about bonds losing value if inflation flares back up again?

A: Worry a little, prepare a lot. Rule of thumb: price change ≈ −duration × rate move. So a fund with 7‑year duration could drop ~7% if yields jump 1%. Ways to cushion that:

• Add 10-25% TIPS to your bond sleeve, direct inflation linkage.
• Keep a cash/T‑bill sleeve you can redeploy on spikes (optionalty beats bravado).
• Favor higher‑quality credit; if inflation re-accelerates, lower quality spreads can widen too, double whammy.
• Stagger maturities (2, 5, 7 years) so you’re not hostage to one point on the curve.
• If you’re rate‑sensitive and tax‑efficient, consider CDs or short callable agencies; just read the call language, been burned there before. Net: accept some volatility, make it survivable.

@article{how-to-position-your-portfolio-for-2025-rate-cuts,
    title   = {How to Position Your Portfolio for 2025 Rate Cuts},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/2025-rate-cut-portfolio/}
}