March 17, 2026
By Matthew Vegari, Head of Research
After pressing the pause button in the first half of 2025, the Federal Reserve cut its policy rate three times from September through December, before pausing again in the new year. Despite ongoing labor market wobbliness, policymakers have signaled that they are in no rush to cut again. With another rate decision arriving tomorrow (no cut is expected), this week’s brief focuses on the trajectory of policy for the remainder of the year and leverages Clearwater’s proprietary database to explore recent trends in corporate treasury strategy and performance.
With last year’s cuts, the fed funds rate has fallen into estimates of “neutral” territory. We call neutral, aka r* (r-star), the level at which monetary policy is neither slowing the economy nor catalyzing it. With inflation still above the Fed’s 2% target (where it has been for five years!), why has the Fed been cutting at all?
The answer lies in the labor market, where job growth has been virtually nonexistent. The unemployment rate has slowly crept back up, creating a tension point for policymakers. As Chairman Powell noted back in October, “If [price stability and full employment] are sort of equally at risk, then you ought to be at neutral, because one of them is calling for you to hike, and one of them is calling for you to cut.”
Tumult in the Middle East is not making life easier for policymakers. With the price of oil surging, a major question mark has resurfaced around inflation; upside risks to prices (at the pump, in the air, on the farm) from a prolonged conflict in Iran are material. We can sort through two paths depending on how the US-Israeli bombardment shakes out in coming days/months:
With the Fed poised to stay on pause in 2026, what does corporate treasury performance look like these days? In truth, we are well past peak returns but also well ahead of the dismal 2010s.
At present, the dispersion of trailing 12-month returns on Clearwater’s platform is quite narrow: just 38 bps between the 25th and 75th percentiles. This narrowness follows the slow change of monetary policy. When the Fed changes policy aggressively, such as 2022-23, corporates vary in their performance, as some are caught flatfooted with out-of-date strategies. Given that monetary policy has been slow-moving (and well telegraphed) for the past year, a lack of dispersion is to be expected. Corporates are by and large moving as one.
A narrow dispersion does not mean no dispersion at all. There are always “winners” underneath the hood, firms that earn extra mileage from their treasuries. True, some corporates are capped in their upside; bylaws restrict the assets (or duration) they can purchase. We’ve done our best to trim such outliers for benchmarking purposes. At present, top performers are outearning the average by 80 bps (ann.) year to date. Multiply that by an average treasury of $600 million in AUM, and an additional $5 million isn’t chump change.
As the Research Desk has noted previously, a good strategy varies from year to year. Of late, firms with greater fixed income exposure (read: more duration) have been outperforming their peers. Generally speaking, duration has been picking up across our platform since mid-2023. Over the past year, those with extended duration have tended to do better, locking in yields as the Fed has cut.
If policymakers end up cutting more in 2026, said firms will outperform by an even wider margin. If inflation picks back up, however, those standing still with cash will be bailed out by a reluctant Fed.
Additional research by Tyler Busby, Data Scientist