How Income Investors Could Capitalize on a Rate Pause

Income-focused investors have had plenty of factors to keep in consideration as of late.

The latest CPI report showed that consumer prices rose at an annual rate of 2.6% in December, which was actually 0.1% lower than expectations. This report helped reignite the narrative that inflation may not be as potent a risk as expected. That could give the Federal Reserve more time to wait and see before making an interest rate cut. In fact, on Tuesday, Elizabeth Hammack, president and CEO of the Cleveland Fed, said rates “could be on hold for quite some time,“ as the bank faces less urgency and has time to address incoming data. 

Tamer-than-expected inflation data and a more patient Federal Reserve could bode very well for income investors. If the Fed stays on hold for a while, income-focused investors can benefit from more predictable cash flows, instead of having their yields cut down alongside interest rates. 

A recent Substack post from GraniteShares explains how a diversified income strategy could benefit from this environment, more so than leaning into a single income strategy. The post notes that both closed-end funds and business development companies can benefit from a more neutral Fed and cooler inflationary environment. Better yet, these aren’t the only two strategies that could provide attractive income right now.

“Real estate trusts tend to benefit as borrowing costs stabilize and yield comparisons with bonds become more favorable,” the GraniteShares post added. “Historically, REITs have often performed well following the Fed’s first rate cuts. Energy infrastructure partnerships, by contrast, have shown limited sensitivity to interest-rate cycles, supported by contract-based revenues and steady demand.”

HIPS: 4 Routes to Income in 1 Ticker

Those looking to tap into all four of these income sources at once may want to take a closer look at the GraniteShares HIPS US High Income ETF (HIPS). Within a single ticker, HIPS seeks to tap into income from four separate income categories: closed-end funds, master limited partnerships (MLPs), business development companies (BDCs), and real estate investment trusts (REITs). 

This diversified approach can provide distinct benefits for those who choose to add HIPS to their portfolios. Even if one income category is faltering, HIPS’ diversified portfolio allows investors to tap into multiple avenues to pursue alternative income. Meanwhile, when all four income sources are performing well, HIPS can provide its investors with deep income potential to fortify portfolio yield. 

So far, HIPS has offered highly compelling yield to its investors this year. As of January 28, 2026, the fund has a 30-day SEC yield of 12.15%.

For more news, information, and strategy, visit ETF Trends. 

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