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How high do CD rates have to go to entice you to pull money out of equities?

5% makes me a buyer of any Government paper, i.e. treasuries or minus. That is my cruise rate of return with minimum risk, sleep well at night investments.

I still recall my zero coupons TIGR, purchased 1983, 25-year at 13.25%. As you can see, I lightened-up my expectations.
I am at my base level of equities, so I am not pulling money out of that asset class. I will reinvest my maturing ladder at higher rates though, thank you very much.
4% for 2-3 year CD's might get me to move a little,but would have to be 5-7% to entice a big shift
Back in the 80's my 401K offered 16% for 30 years, guaranteed and insured. (Not US 30 yr Treasuries per se, but based on them) I put my cash there, and transferred from my least favorite equity fund. Then I watched rates drop for 25 years.  Its not a matter of how high rates go;  it's a matter of when do they stop going up?
So that was a great deal, right?  It should have been, but the fund went belly-up in less than two years.  We eventually (10+ years) got most of our principal back, but nary a dime of interest
CD's are not an alternative to equities.  They are an alternative to cash.  I started a short term CD ladder (4 rungs, 3-6-9-12 mo) basically when the taper tantrum hit 2-3 years ago. The 5th and lowest rung (current quarter) actually is cash.  My latest 12 month rung faces 2.3% coupon. Every time I re-invest a one year, the rate is higher than the 2 year was a year earlier (ie, the second year I do better with  new one year rate than I would have done locking in a 2 year.  That's the flat yield curve for you
Somewhere in the last 6-9 months the money market funds started to distinguish themselves from the FDIC-insured core cash positions.  I probably should have shifted earlier than I did, but most of my core cash is now money market nearing 1% rather than FDIC insured core cash at 0.01% (or maybe 0.08% now)
So yes, I am paying some attention to parking cash, but no, I would not lock in 4% or 5% for 5 years.
I will never trim equities because I want CDs instead.  But I might trim equities because I expect price weakness, or because I want consumption cash.  And if I trim, I might park cash in CDs or money markets rather than FDIC core cash positions.  ( and "never" might lose its certitude if I saw 10% on a ten year Treasury)
[font=Helvetica,Arial,"Lucida Grande",sans-serif]Would you also be looking at US TIPS to protect yourself over the term should you 'guess inaccurately' when rates peak?[/font]
It's the rate on the US 10 yr that you really have to watch.  It was over 5% at the beginning of the last financial crisis.  I don't think it will get that high before the next recession.  The yield curve may even invert at 3% by the end of this year, which would really be pathetic.  It's hard to imagine that 3% on the US 10yr could take this economy down.  If I had to guess, I would say above 4%.
A whole lot higher than this. And I’m comfortable holding Fidelity cash 100% liquid at 1.52% awaiting opportunity rather than tying it up for a little more.
You have a choice with investing: you can be a LENDER or an OWNER.
Owners use the lenders to generate wealth.
Lenders include bond holders and CD owners. Banks use CD “lenders” to generate real returns. Other companies including banks use bond proceeds to fund wealth creation. You generally want the owners part of that bet.
Do you want a stable consistent, but very modest return as a lender?  Or do want to invest in OWNERSHIP and get the proceeds of hard work, creativity, etc and get your piece of the historic 8-10% a year that ownership provides (with inflation protection)?
Lending has a place but won’t eat into ownership for me until you get to at least get to mid to high single digits ...7% or so...
I have one CD remaining in my account that I bought a long time ago. It pays 5.2%.

So, if my past is any indicator, I might be tempted at something north of 5.5%, but only if I had a lot of cash sitting on the sidelines. At this point I'm 95% stocks with no intention of moving to cash, CDs or bonds.
3.5% for a 12 month would put me all cash by laddering jumbo's out as many years as are available. 3.5% for a 12 month should put a 5 year at 4.5 to 5%. It would not be the answer for many. We have many beans, more than adequate retirement income not including investment income, and will never touch our ira's or 4xx's other than RMD's.
Right now, I see several banks offering 5-year CDs with APY at 3%+. That's not quite high enough for me to pull money out of equities, but I'm starting to look hard at the extra cash that I have sitting in my brokerage accounts that I was saving as dry powder. At 4%, I think I would start pulling a little money out of equities, and at 5%+, I think I would target around 20%+ in CDs, though I think I would ramp that up over time as opposed to all at once.

I'm sort of happy that people can earn somewhat decent returns from CDs now, but I wonder what effects that will have on equity (and bond) markets?

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