By Megan Leonhardt

The S&P 500 rallied more than 2% on Friday, leaving investors hopeful that the stock market has reached a turning point after this year's widespread selloff.

But with the index still down about 4% year to date, and the Nasdaq Composite off twice that amount, there's a lot to be said for seeking safety in cash. High-yield savings accounts, Treasuries, and even certificates of deposit offer decent options for investors with a relatively short time horizon. Many yield more than 4%.

Although the Federal Reserve lowered its benchmark lending rate by a full percentage point last year, to a target range of 4.25%-4.50%, rates are unlikely to fall further in the near term. Fed officials are set to meet again on March 18-19, and the odds of another interest-rate cut are only 2%, according to the CME FedWatch tool. Futures traders put the odds of a rate cut at the central bank's May policy meeting at 27%, unchanged from a week earlier.

The national average savings account has an annual percentage yield, or APY, of 0.41%, according to the latest data from the Federal Deposit Insurance Corporation. But many online banks and credit unions offer much higher rates, with a number advertising an APY above 4%. APY is the annual rate of return earned, including compound interest.

Axos, for example, currently offers up to 4.86% on its One Savings account if customers' monthly direct deposits into an Axos checking account total at least $1,500, and the average daily account balance is greater than $1,500. CIT Bank is advertising an APY up to 4.3% on balances greater than $5,000, and roboadvisor Betterment provides up to 4.50% for new customers opening a Cash Reserve account.

The FDIC offers insurance protection on deposits up to $250,000 per depositor, per FDIC-insured bank.

The national average APY for a one-year CD was about 1.89% as of March 13, while rates for three-year and five-year CDs averaged 1.55%, according to Bankrate. But, as with high-yield savings accounts, there are banks that offer higher rates of up to 4.5% on CDs. Marcus by Goldman Sachs is offering a 4.5% rate on a 14-month high-yield CD with a $500 minimum deposit. Vio Bank is offering a 4.3% rate on a 6-month CD, again with a minimum of $500 deposit.

Treasury bills also look attractive. The three-month Treasury bill rate was 4.30% as of March 14. T-bills are paying 4.08% for a one-year term. These are sold in $100 increments and the "interest" is the difference between the face value and the purchase price, which is below the par value.

"Amid all the on again/off again tariff posturing that has the U.S. equity market seemingly in total chaos, I'm pleased to say that the bond market has rallied sharply, drawing capital flows into assets that have reliable balance sheets," Bryan Perry, senior director at Navellier & Associates, wrote Friday.

Perry expects the stock market to remain on the defensive in the near term, noting that some of the most widely held momentum stocks have retreated as much as 30% to 50% from their recent highs. But he cites a "welcome calm" in the debt and credit markets.

These haven options may start to look less attractive later this year, however. Many economists expect the Fed to cut rates at least twice later in the year, as the economy slows. While banks' interest rates aren't tied to the fed-funds rate, the APY on offer tends to be lowered in tandem with the benchmark rate.

Francis Gannon, Royce Investment Partners' co-chief investment officer, says investors shouldn't be discouraged by the recent policy and market uncertainty. Although the S&P 500 officially slipped into a correction on Thursday, down 10% from its previous high, Gannon notes that corrections are "finite" and not all that uncommon.

"The equity markets hate uncertainty, and we continue to see plenty of headline and policy-driven risk in the near term that will drive market volatility," Gannon says. "Yet it will also drive long-term opportunity."

Meanwhile, cash instruments pay you to wait.

Write to Megan Leonhardt at megan.leonhardt@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 15, 2025 15:45 ET (19:45 GMT)

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