Wall Street did not get everything it wanted, the US election will be the focus of the whole field!

The Federal Reserve took significant action early Thursday morning, making its first rate cut in four years. The Fed cut its short-term policy rate by 0.5 percentage points to a target range of 4.75% to 5%. But Wall Street did not get everything it wanted. The long-term Treasury bond yields used to price auto loans, mortgages, and more are rebounding from the year's lows reached just a few days ago. The higher yields indicate that despite the Fed's aggressive rate cut, Wall Street is disappointed with the signals the Fed is sending for the coming months. Cindy Beaulieu, Chief Investment Officer for North America at Conning, which manages around $160 billion in assets, said, "We think rates across the curve have come down too fast and too hard." While the initial 50 basis point rate cut was surprising, Beaulieu said, Fed Chair Powell conveyed a cautious attitude towards future rate cuts during the press conference. Powell called Thursday's move "the beginning of this process," but he said the Fed is not in a rush and will proceed cautiously at each subsequent meeting. He mentioned, "We can have a good strong start. I'm pleased that we did." Beaulieu believes this approach sounds cautious, even if it's not what all investors want to hear. "We still have a robust economy, and consumer spending has not faltered," she said. "It makes sense for long-term rates to rise." Beaulieu believes the 10-year yield could rise above 4% by year-end, possibly reaching 4.25%. She said, "The market is talking about a soft landing, but when rates are this low, it sounds more like a recession ." Since the Fed began raising rates in 2022, bond market volatility has been high, leading to historic losses in bonds and turbulence in financial markets. While inflation and rate hikes no longer pose the same threat to investors as they did two years ago, shocks in the rate market could still cause pain for portfolios. Karen Manna, Fixed Income Portfolio Manager at Federated Hermes, which manages around $780 billion in assets, said, "We've seen the bond market run too fast several times, and the stock market too." Manna said, "We all want to look forward, trying to anticipate the future. But we can't predict what the economy will do." Given the ongoing economic uncertainty, especially if the housing market rebounds, Beaulieu of Conning does not advocate extending bond portfolio durations and is not confident the Fed can bring inflation down to its 2% annual target—especially if it continues to cut rates. However, she does expect that in the coming months, especially nearing the November presidential election, spreads—extra compensation for bonds with credit risk—will widen. Manna of Federated said, now that the first rate cut has arrived, the election will be the top concern for investors. She believes investors should prepare for a prolonged period of uncertainty, whether about the Fed's next moves or the market's reaction to rates Mannar added that it is now time to monitor the liquidity in the investment portfolio to prevent investors from being trapped in asset classes with insufficient liquidity and forced to make transfers