In an environment of high interest rates and stubborn inflation, many investors have sought refuge in fixed income products this year. However, two experts are now urging a reevaluation of popular allocation strategies as indications grow that the Federal Reserve is nearing the end of its interest rate hiking campaign. They advise investors to make preparations for a potential lower-rate environment in the next few years.

Dan Egan, Vice President of Behavioral Finance and Investing at Betterment, emphasized the importance of proactive decision-making in light of potential interest rate adjustments. Speaking to CNBC's "ETF Edge," Egan said, "We're at the top of the mountain, where people need to start thinking about if interest rates start coming down in the next 2 to 3 years, what are good moves I need to be thinking about right now to be making?"

This shift in investor sentiment comes in the wake of a cooler-than-expected Consumer Price Index (CPI) print in October, which creates hope that the Federal Reserve will soon scale back its rate hikes. Investors who allocated their funds in money market funds this year have reaped the benefits, with yields comparable to those of the 10-year U.S. Treasury note, which surpassed the critical 5% level in October.

As of Wednesday's market close, however, the yield on the 10-year note has fallen to 4.408%, while the average yield of the 100 largest taxable money market funds tracked by Crane Data stands at 5.20%.

The popularity of fixed income products such as money market funds and the attractive yields they offer may start to wane as interest rates decline, cautioned Matt Bartolini, Head of SPDR Americas Research at State Street Global Advisors. He said, "My expectation with rates coming down is we start to see that come out. I think my expectation again would be for it to go into either equities and people re-risk, but if you're staying within fixed income, to produce that high level of income, be in that 1- to 10-year space."

Bartolini further advised clients willing to assume more risk to consider shorter-duration bond funds. "You can go into the 1- to 3-year duration, use an actively managed strategy that can have that total return mindset to get higher yield [and] to mitigate some duration-induced volatility," he suggested.

While the iShares 1-3 Year Treasury Bond ETF (SHY) tracking shorter-duration notes has gained 0.22% this year as of Wednesday's close, the iShares U.S. Treasury Bond ETF (GOVT), which includes Treasurys ranging between 1 and 30 years in duration, experienced a decline of 1.85% during the same period.

Egan agreed with Bartolini's recommendations and advised investors to plan and take on additional risk. He urged investors to set up mental accounts and establish goals aligned with their risk tolerance, stating, "Do that now so that when the opportunity is there, you're ready to pull the trigger."

Given the shifting dynamics in interest rates, it appears that reassessing fixed income strategies, actively managing durations, and considering potential shifts to equities may be prudent moves for investors. It is essential to remain vigilant and prepared as the investment landscape evolves.

Disclaimer: The information provided in this article is based on expert opinions and market data available up to the specified dates mentioned in the original text. Readers are advised to conduct thorough research and consult with financial professionals before making any investment decisions.