{"id":17106,"date":"2024-04-17T12:37:37","date_gmt":"2024-04-17T19:37:37","guid":{"rendered":"https:\/\/www.wealthfront.com/blog\/?p=17106"},"modified":"2025-10-27T15:21:41","modified_gmt":"2025-10-27T22:21:41","slug":"investing-based-on-interest-rate-movement","status":"publish","type":"post","link":"https:\/\/www.wealthfront.com/blog\/investing-based-on-interest-rate-movement\/","title":{"rendered":"Should Interest Rate Changes Affect Your Decision To Invest?"},"content":{"rendered":"\n

It can be tempting to adjust your investing strategy based on the news, including news about interest rates\u2014and there\u2019s been plenty of that lately, as many people speculate about if and when the Federal Reserve will cut the target range for the federal funds rate. In a previous blog post, we wrote about how investing based on interest rate levels<\/a> is unlikely to work out in your favor. But you might wonder whether investing based on movement<\/em> in interest rates is a good idea. In other words, if you hold more cash when interest rates are rising and then invest more when they start falling, can you improve your returns?<\/p>\n\n\n\n

While history can\u2019t predict the future, looking at historical data is one of the best tools we have to try and answer such questions. That\u2019s what we\u2019ll do in this post. <\/p>\n\n\n\n

What happens when you change your investing strategy based on interest rates?<\/h2>\n\n\n\n

To try to answer this question, let\u2019s start by assuming we have $100 to invest at the end of every month. Each month, we\u2019ll decide whether to invest that $100 in US equities or keep it in cash. We\u2019ll use data from Kenneth French\u2019s website<\/a> as the source for both US equity market returns and the one-month Treasury bill rate (which we use to represent the risk-free rate, or the rate you get for holding cash). We\u2019ll look at the data back to 1926, and try out three different strategies:<\/p>\n\n\n\n