Why Investors Are Turning to Cash Amid Tariffs and Market Volatility

In recent months, market volatility across U.S. and Canadian equities has intensified, prompting many seasoned investors to reexamine their approach amid growing uncertainty. The potential imposition of new tariffs has added another layer of complexity and spurred concerns about trade disruptions and their knock-on effects for global equity markets.^1,2,3

Against this backdrop, a cautious approach to portfolio management is gaining traction. Many investors are looking to de-risk their portfolios by turning to more conservative vehicles, such as high-yield savings account ETFs and money market ETFs. These instruments, which offer relatively stable returns, present an attractive alternative for those seeking to preserve capital while generating income.

Join us as we delve into why shifting a portion of your portfolio to these lower-risk options may not only be prudent but also strategically sound in the face of uncertainty. By prioritizing capital preservation over high-risk returns, you can better navigate elevated volatility in equities.

Why Investors Look for Low-Risk Investments in Volatile Times

When faced with volatile market conditions, is it any surprise that investors naturally gravitate toward strategies that minimize risk and protect capital? When the potential for large market swings increases, the prospect of holding volatile equities becomes less attractive, and investors seek to balance the possibility of higher returns with the reality of higher uncertainty.

Something like the imposition of tariffs can spark a broader shift in market sentiment—a phenomenon known as a “risk-off.” When markets are “risk-off,” investors move from risky assets (like stocks) and into safe haven holdings, making traditionally lower-yielding, more stable, low-risk alternatives like high-yield savings accounts and cash-like instruments more attractive.⁴

This de-risking cushions portfolios against unexpected downturns. It is not a retreat from the market, but rather a calculated move to preserve capital and maintain liquidity during turbulent times. It comes down to a fundamental principle of risk management: when the future is uncertain, secure gains rather than chase higher returns at the expense of stability.

ETFs and Low-Risk Investment Options

One way that investors can de-risk their portfolio is by turning to cash-like instruments such as high-yield savings account ETFs and money market ETFs, which offer modest yet predictable returns.⁵ These instruments provide a safeguard against market volatility, ensuring that a portion of the investor’s portfolio remains resilient even when broader market conditions deteriorate.

ETFs (Exchange-Traded Funds) have emerged as a favoured vehicle for investors seeking both diversification and liquidity. Unlike traditional mutual funds, ETFs trade on stock exchanges, allowing for real-time pricing and the flexibility of stock-like transactions. For those aiming to reduce exposure to market volatility, ETFs that focus on low-risk, cash-equivalent assets present an appealing alternative.

High-yield savings account ETFs, for example, mimic the returns of premium savings accounts by investing in instruments that offer relatively attractive interest rates, all while maintaining a conservative risk profile. These funds provide a way to earn more than what one might expect from a standard savings account, without venturing into the unpredictable realms of equities.⁶

Similarly, money market ETFs concentrate on short-term, high-quality debt securities. By targeting instruments with maturities of less than a year, these ETFs minimize interest rate risk and credit risk, offering investors a steady stream of income with minimal price fluctuations. Their conservative nature makes them a dependable component of a portfolio during periods of market stress.⁷

In essence, high-yield savings account ETFs and money market ETFs serve as a bridge between the need for liquidity and the desire to preserve capital. As investors grow increasingly cautious amid potential tariff-induced market disruptions, such low-risk options are gaining traction as effective tools for safeguarding wealth and ensuring financial stability.

Navigating your cash with money market and cash alternative ETFs

Our current climate of economic uncertainty has made money market and cash alternative ETFs appealing options for individuals looking to secure capital, generate attractive returns, and manage their investments conveniently.

Evolve’s High Interest Savings Account (HISA ETF) invests in high-interest deposit accounts with Canada’s “Big Six” Banks, while Evolve’s money market funds, Premium Cash Management Fund (MCAD ETF) invests in Canadian dollar-denominated money market instruments.

To learn more about our cash solutions suite, click here for our Cash Solutions brochure. Understand your options for navigating your cash.

 

ENDNOTES

1. Halpert, M. & Murphy, J., “Trump agrees to pause tariffs on Canada and Mexico but not on China,” BBC News, February 4, 2025; https://www.bbc.com/news/articles/c87d5rlee52o
2. Hoskins, P., “China’s tit-for-tat tariffs on US take effect,” BBC News, February 10, 2025; https://www.bbc.com/news/articles/cvg8zg7ll09o
3. Starcevic, S. & Ruhiyyih Ewing, G., “Trump vows to launch trade war on EU,” Politico, February 1, 2025; https://www.politico.eu/article/donald-trump-trade-war-eu-tariffs-mexico-canada/
4. Hayes, A., “Risk-On Risk-Off: What It Means for Investing,” Investopedia, December 18, 2023; https://www.investopedia.com/terms/r/risk-on-risk-off.asp
5. Richardson, D. & Kedwell, S., “When to de-risk a portfolio and why do it?,” The Download, September 3, 2024; https://www.rbcgam.com/en/ca/insights/podcasts/when-to-de-risk-a-portfolio-and-why-do-it/detail/
6. “High-Interest Savings ETFs,” Ratehub.ca, n.d.; https://www.ratehub.ca/bank-accounts/high-interest-etfs
7. Archer, C., “What are money market ETFs and how can you invest in them?,” IG, n.d.; https://www.ig.com/en/trading-strategies/what-are-money-market-etfs-and-how-can-you-invest-in-them–241210

Source: Getty Images Credit: Javier Ghersi

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