Ongoing inflation is more important than a Fed rate cut, says Charles Schwab's Kathy Jones

Core Viewpoint - The bond market's reaction to Federal Reserve actions is critical, with inflation trends being a more significant driver of bond yields than Fed rate cuts [3][4][6]. Group 1: Federal Reserve Actions - The Federal Reserve's potential rate cuts are largely anticipated by the market, but the actual impact on borrowing costs, such as mortgage rates, remains uncertain [2][4]. - The Fed's balance sheet management, including quantitative easing (QE) and quantitative tightening (QT), is crucial for influencing long-term bond yields [9][10]. Group 2: Inflation and Economic Conditions - Inflation remains a key concern, with current rates around 3% and showing signs of increasing, which complicates the economic landscape and poses risks of stagflation [3][7]. - The bond market is experiencing hesitancy in longer-term investments due to inflation expectations and significant fiscal deficits in various countries [6][7]. Group 3: Market Dynamics - There is a possibility of a bond market rally following Fed rate cuts, but it may not be sufficient to lower mortgage rates below 6% [8]. - The dynamics of supply and demand for bonds, particularly longer-term bonds, are influenced by investor confidence and the Fed's actions regarding its bond holdings [6][7].