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That trend began reversing in 2024, and unfortunately for income investors, its likely to continue into 2025.
The federal funds rate doesnt directly mandate how much various fixed-income investments pay.
At its post-COVID high, the account paid a 4.50% APY.
This means owning true fixed-income securities, like individual bonds.
If rates fall, youll still be earning the rate on the securities you bought.
Those higher-rate securities will also become more attractive to other investors, which will push up their prices.
Bear in mind that any variable-rate investments, such as high-yield savings accounts, do not carry locked-in yields.
Another scenario in which rates could rise instead of fall is if the economy continues to gain strength.
This is a possibility if Trumps pro-business policies gain traction, with the backing of a Republican Congress.
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