Investing in bonds when the Federal Reserve began lowering interest rates could prove to be a costly mistake in the near future.

• As the Fed reduced interest rates, it was anticipated that treasury bond yields would decline and bond prices would increase.
• The federal deficit and market concerns have kept yields under pressure, potentially leading to a slowdown in progress and lower inflation.
• Guggenheim Partners Investment Management's chief investment officer, Anne Walsh, stated on CNBC's Delivering Alpha on Wednesday that the bond pressure may persist for several years.

When the Federal Reserve cut interest rates, it was expected that bond prices would increase and yields would decrease. However, this market has deviated from historical norms, keeping bond yields high due to various factors, including ongoing worries about the federal deficit.

Institutional investors predict that Donald Trump's reelection as president may lead to inflation, a larger deficit, and prolonged pressure on bond yields.

According to Anne Walsh, Guggenheim Partners Investment Management chief investment officer, who spoke at CNBC's Delivering Alpha investor summit on Wednesday in New York City, she was surprised by the stock rally after the U.S. elections, but less so that stocks went up than that they went up by so much. However, her bigger concern remains on the bond side of the markets.

She stated that investors will become "more cautious" due to the election rally and the advancement of expectations regarding tax cuts, regulation, and their impact on growth.

The bond market is expected to be even more volatile due to reflationary concerns, as tax cuts contribute to the deficit and the Fed continues to make progress on inflation. The latest CPI data out Wednesday showed "stasis" in the effort to address inflation.

On Thursday morning, the stock reached a session high of 4.483%, its highest level since July.

"Volatility will be with us for a while," Walsh said.

She anticipates the 10-year treasury yield to fluctuate between 3.5% and 4.5% for an extended period, possibly several years, although she acknowledged that it's an unconventional prediction to assume the yield pressure will persist for that long.

Walsh stated that the question for bond investors is not only the extension of tax cuts but also the implementation of new tax cuts without any revenue offsets.

David Einhorn, the hedge fund manager of Greenlight Capital, stated at DA that he has been increasing his bets on inflation due to his expectations of Trump's policies.

According to CNBC Wealth Editor Robert Frank, the total cost of implementing Trump's 2017 tax cuts and fulfilling his campaign promises on taxes would result in approximately $10 trillion in lost revenue. The largest source of revenue to offset this loss, Trump's tariff plans, is estimated to generate only about $3 trillion over a ten-year period.

Trump may not be able to convince Congress to vote for a deficit-financed bill with all of the tax cuts, but he has a GOP expected to be even more deferential to him in his second term and a GOP sweep on Capitol Hill. As Rohit Kumar, co-leader of PwC's national tax office and former deputy chief of staff to outgoing Senate Majority Leader Mitch McConnell recently told CNBC, "The arc of history here reminds us that every time long-term deficit concerns come into conflict with near-term policy, near-term wins," Kumar said. "It's batting about 1.000."

Walsh predicts that fixed income volatility will be higher than equity volatility, but investors should also be cautious of the increasing risk premium for stocks, she stated.