Analysis: Before the U.S. presidential election, investors may not be able to correctly assess the Federal Reserve's actions

On October 25th, since the Federal Reserve cut interest rates sharply on September 18th, U.S. long-term bond yields, inflation expectations, and the “term premium” (the compensation investors receive for buying long-term Treasuries rather than rolling over short-term ones) have risen sharply. Considering that former President Donald Trump appears to be regaining momentum in the presidential race while advocating a series of potentially budget-busting programs, this may reflect investor concerns about fiscal profligacy and overly dovish monetary policy. Analysts at Bespoke Investment Group noted that in the Fed's first of 35 rate cuts since 1994, the 10-year Treasury yield posted its third-largest gain ever, behind November 2001 and June 2008 during the same period. Ultimately, it is unlikely that investors will be able to properly assess the Fed's actions before the Nov. 5 presidential election.