As mentioned, mortgage rates haven't fallen in line with the Fed's rate cuts because they depend on factors beyond the agency's benchmark rate, such as the economy and 10-year Treasury bond yields. For example, when the 10-year treasury rate goes up, mortgage rates tend to follow, and vice-versa.

The economy has been running hotter than expected lately, raising the possibility that the Federal Reserve will hold interest rates higher for longer, and may not even cut interest rates in 2025 as policymakers had predicted.

Historically, for bonds, a recession following a first Fed rate cut leads to better relative performance while stocks would prefer to avoid a recession. Either way, both stocks (six) and bonds (six) are roughly on par with each other in terms of the number of negative 12-month real returns across the 22 interest rate cutting cycles studied.