There is currently over $8 trillion sitting in money market funds (MMF).

For the better part of two years, that positioning was rational, as cash delivered yields exceeding 5% with daily liquidity while equities endured valuation swings, rate shocks, and sector concentration risk. In an environment defined by tightening financial conditions and inflation uncertainty, liquidity was not laziness was the smart route to take.

Considering that the federal funds effective rate seeing a sustained drop to 3.64% (from 5.33% in August last year), the opportunity cost of sitting in cash is rising sharply. Although this rate of decline is expected to slow down in 2026, a complete policy reversal is unlikely, which means that cash yields will continue to compress relative to real asset alternatives.

Given this backdrop, portfolios heavily weighted in money market funds may no longer be optimizing client outcomes.

This shift creates a compelling case for revisiting real assets—investments that can provide both income and growth potential while serving as a hedge against lingering inflation pressures.

Sectors such as data centers, senior housing, and select retail REITs are uniquely positioned to benefit from stabilizing rates, resilient demand trends, and improving forward FFO visibility.

Real assets today are no longer purely defensive; they offer measurable upside potential with structural tailwinds, making them a core consideration for the 2026 portfolio playbook. For portfolio builders, the question is how to thoughtfully integrate these real assets without sacrificing liquidity, diversification, or risk-adjusted returns.

Portfolio Positioning After Inflation Peaks

According to JP Morgan, inflation may linger above the Fed’s 2% target, owing to tariffs, a weaker dollar, labor supply constraints, and potential fiscal stimulus in the first half of 2026. Other economists, as reported by Bloomberg, report a similarly stubborn inflation trajectory:

Historically, portfolios have been penalized for being late to adjusting to persistent inflation and shifting interest rate regimes.

The 2024–2025 market cycle exposed the limitations of traditional 60/40 portfolios, which were designed for capital growth and preservation. While the high equity valuations impacting the markets has been a wide discussion, many often overlook the fact that low bond yields have also eroded the “safe” side of the portfolio.

This environment presents a significant challenge for client psychology: many investors have become "anchored" to the risk-free yields of money market funds and short-term Treasuries. However, as the Fed pushes on with its easing cycle—aiming for a 3.11% Fed Funds Rate by year-end—the "Cash is King" era is giving way to Yield Displacement. This occurs when falling short-term rates force capital out of "sideline" assets (like the $9.1 trillion currently in money market funds) and back into the risk-on market to maintain income levels.

One way to strategically manage this displacement involves a tiered “three pot” transition into real assets that balances the sticky inflation risks:

Pot 1: Inflation-Linked Stability (TIPS & Infrastructure)

Given the potential for a stubborn, tariff-fueled CPI in early 2026, maintain a base of liquid real assets.

• Tactical Move: Combine Treasury Inflation-Protected Securities (TIPS) with Global Infrastructure ETFs. This provides a liquid proxy for private infrastructure while protecting against the "stubborn inflation" trajectory noted by Bloomberg.

Pot 2: High-Visibility Income (Data Center & Senior Housing REITs)

Move clients from "lazy cash" into sectors with Forward FFO Visibility.

While a money market yield is static (or falling), REITs like Welltower (WELL) or Equinix (EQIX) are growing their dividends. With WELL projecting 16.6% FFO growth and EQIX boosting dividends by 10%, these assets offer rising income in a falling rate environment—the definition of an alpha-generating yield play.

Pot 3: The Valuation Gap Play (Mid-Cap & Small-Cap REITs)

The valuation gap between the S&P 500 and the Equity REIT Index is currently at extreme levels:

Allocate to Mid-Cap strip center REITs (e.g., Kimco) that are seeing record occupancy. This captures the "Value Rotation" while providing a buffer against the "bubbly" valuations of AI-concentrated tech.

We've enjoyed the safety of 5% cash, but the market is already moving. By reallocating a portion to senior housing and data centers now, investors can lock in high-quality yields and position for capital gains as the rest of the $8 trillion in 'sideline cash' eventually flows through into these sectors.

Capturing Value from ‘Structural Demand’ Sectors

While generalist investors often view real estate as a monolith, 2026 is proving that structural demand—especially when driven unavoidable technological and demographic shifts—is creating an elite tier of outperformance. For advisors, the strategy is shifting from broad market beta to high-conviction "essential infrastructure" plays.

Some of the most compelling avenues to consider are:

• Data Centers: 

The software hype cycle may be volatile, but the infrastructure that supports it is constrained and indispensable.

• Data center REITs such as Equinix (EQIX) and Iron Mountain (IRM) are seeing record pre-leased capacity and robust enterprise demand. EQIX forecasts AFFO growth of 10–12% in 2026, far above consensus.

• Low national vacancy (<2%) and pre-leased expansion projects create a high-margin, recurring income stream with durable pricing power—a compelling case for clients seeking both growth and income.
  
  

• Senior Housing: Demographics in Action

An aging population is not a trend; it is a structural inevitability.

• With Baby Boomers crossing the 80-year threshold in 2026 and new construction down 20–70% over the past four years, operators like Welltower (WELL) are seeing NOI growth of 18–22%.

• Senior housing portfolios (SHOP) provide defensive growth with limited interest rate sensitivity, making them ideal for clients prioritizing stability alongside structural tailwinds.
  
  

• Grocery-Anchored Retail: Scarcity Meets Necessity

Not all retail is fading—well-located, necessity-driven centers are thriving.

• Top-tier grocery-anchored REITs are reporting several consecutive quarters of double-digit leasing spreads, benefiting from minimal new development over the past decade.

• These centers deliver resilient yield and inflation-resistant cash flow, providing a hedge against rising construction costs and supporting long-term income strategies.

Reintroducing Real Assets Strategically

Integrating real assets does not require sacrificing diversification or liquidity. A strategic tiered approach—starting with inflation‑linked exposures, progressing into high‑visibility income real assets like data centers and senior housing, and selectively capturing valuation opportunities in mid‑cap REITs—can help balance yield, growth, and risk across client portfolios.

• Liquid real asset foundations such as inflation‑linked treasuries and infrastructure proxies anchor portfolios against persistent price pressures.

• High‑visibility income opportunities in sectors with predictable FFO growth provide rising cash flow in a falling rate environment.

• Valuation‑driven plays offer participation in the broader value rotation while managing concentration risks inherent in narrow market leadership.

Importantly, real assets in 2026 are no longer just defensive anchors—they are meaningful contributors to total return and portfolio resilience. For forward‑looking RIAs and wealth managers, the key is integration with discipline, data, and structural insight, rather than broad, undifferentiated exposure.

If you’re evaluating how to operationalize this shift—balancing cash transition, real asset exposure, and client objectives—book a demo with Surmount Wealth to explore institutional strategies and infrastructure designed specifically for advisory teams seeking differentiated, scalable solutions.