Here’s where we see opportunity for conservative and growth-minded investors in today’s market

With the Federal Reserve delivering a rate hike in September and expectations for at least one additional increase before year-end, some investors may be wondering whether higher cash yields make now a good time to have money on the sidelines.

Cash and cash-like investments are offering somewhat more attractive yields compared with just a year ago. However, a higher yield doesn't necessarily mean greater purchasing power or wealth creation. Inflation and taxes can take a meaningful bite out of returns, particularly for investors holding large cash balances.

That's why we continue to encourage investors to reassess and right-size cash allocations. While cash serves an important purpose, opportunities for long-term growth remain in other parts of the market. And increasingly, those opportunities extend beyond the handful of technology stocks that have dominated headlines in recent years.

Here are some areas where we continue to see opportunity.

For more conservative investors: Preferreds

Investors looking to put their excess cash to work don’t necessarily need to jump directly into equities. One area we continue to have conviction in is preferred securities.

Preferred securities occupy a middle ground between typical stocks and bonds. Like bonds, they typically make regular income payments. Unlike common stocks, they generally don't participate as much in a company's growth or provide voting rights, which is one reason they tend to offer higher yields.

Preferreds are often grouped within what we call "extended credit” – a segment of the fixed-income market that also includes investments such as corporate hybrids and high-yield bonds. These investments generally offer higher yields than traditional investment-grade bonds in exchange for accepting somewhat more risk. Extended credit remains one of our highest-conviction opportunities today because starting yields remain attractive while corporate fundamentals continue to hold up well.

For investors who are comfortable moving beyond cash but still prioritize income, preferred securities can potentially be a middle ground between the lower return potential of cash and the greater volatility that can accompany equities. We believe preferreds remain one of the more compelling opportunities for investors seeking to generate income while maintaining a relatively conservative risk profile.

For growth-oriented investors: Earnings continue to support equities

For investors with longer time horizons, we continue to believe that equities still have room to grow, as corporate earnings have remained remarkably strong. The second quarter of 2026 marked the seventh consecutive quarter of double-digit earnings growth for the S&P 500, a streak not seen since the period following the global financial crisis.

We expect this strong earnings super-cycle to continue. Earnings forecasts continue to move higher, driven partially by revenues and profit margins surprising to the upside. Importantly, earnings growth is not just contained within a handful of mega-cap technology companies. The median S&P 500 company has delivered approximately 14% earnings growth in both of the past two quarters, well above the long-term average of roughly 8%. That suggests the earnings story is becoming increasingly broad-based, with more companies participating in the expansion than headlines may imply.

This broadening earnings strength helps support our constructive outlook for U.S. equities. Our latest year-ahead outlook implies around 10% upside from current levels, which could provide a more favorable return profile compared with cash over a long-term investment horizon.

Of course, equities come with greater volatility and risk than cash or fixed income. But investors are compensated for accepting that volatility through participation in growing corporate earnings and economic activity.

Where we see opportunities within equities

While the earnings outlook remains constructive for the broader market, we continue to see opportunities in strategic industries and financials.

Artificial intelligence (AI) remains one of the most important investment themes of this decade, but the opportunity extends well beyond the technology companies making headlines. AI requires semiconductors, power infrastructure, electrical equipment, automation technologies and other physical assets needed to support the buildout of data centers and computing capacity. In many ways, AI has become as much an infrastructure story as it is a software story.

This investment cycle continues to drive significant spending throughout the economy. S&P 500 capital expenditures are expected to grow roughly 30% in 2026, while semiconductor sales are running approximately 66% above year-ago levels. As companies continue investing in AI capabilities, we believe businesses providing the tools, equipment and infrastructure supporting that investment could be positioned to benefit.

We also continue to favor financials. While the sector hasn't attracted the same attention as large technology stocks, underlying fundamentals remain strong. Loan growth has accelerated to roughly 7.4% year-over-year, credit conditions remain healthy and capital markets activity has recovered significantly. Global debt and equity issuance reached approximately $6.9 trillion during the first half of 2026, supporting fee-based revenue growth across the industry.

At the same time, financial stocks continue to trade at reasonable valuations relative to the broader market, despite improving profitability. In our view, that combination of strengthening earnings and attractive valuations creates a compelling opportunity for long-term investors.

For investors looking to deploy excess cash into equities, opportunities increasingly extend beyond the handful of mega-cap technology companies that have dominated headlines in recent years. As earnings growth broadens across sectors and industries, we believe investors can find attractive opportunities in different areas of the market.

The bottom line

Higher cash yields following the Federal Reserve's September rate hike may make holding cash feel more appealing, but investors should be careful not to confuse a higher yield with long-term wealth creation. While cash continues to play an important role in portfolios, holding excess cash for extended periods of time can potentially make it more difficult to keep pace with inflation and achieve long-term financial goals.

For investors looking to put excess cash to work, we believe opportunities exist across both fixed income and equities. Your J.P. Morgan Wealth Management advisor can work with you to ensure cash positions are right-sized and you stay on track for achieving your long-term goals.

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