On Sept. 17, the Federal Reserve finally gave Wall Street what it had been asking for. The central bank cut its effective federal funds rate (EFFR) for the first time since 2024. Unsurprisingly, the market reacted favorably and is up 1.42% since that announcement.
However, debt securities are becoming increasingly unappealing for income investors who had grown accustomed to higher-than-average rates on fixed-income products since the early days of the pandemic. And suppose the Fed continues lowering the EFFR throughout the remainder of the year. This is exactly what happened last year when it began a rate cut cycle in September and ended in December—many will be turning to the equities market to compensate for lost yield.
