Is the Fed’s 50 basis point rate cut about to kick off a bull market? Hold on! Historically, Fed rate cuts are often accompanied by recessions, and a bull market is only likely to emerge if the US economy avoids a downturn! This chart explains the history of Fed rate cuts and their macroeconomic contexts!
Year-Month
Rate Cut
Successful Trigger of Bull Market?
July 1990
-25bp (Total -50bp)
✔️
Context: Following a rapid rate hike cycle, a rate cut of 25bp occurred in July, with another 25bp in February 1991
July 1995
-25bp
❌
Context: Despite economic slowdown and a 3% rate cut
September 1998
-25bp
❌
Context: Faced with international financial crises, a 3% rate cut was made
January 2001
-50bp
✔️
Context: In response to a stock market crash, a 50bp cut was made, followed by another 50bp, totaling 13% in rate cuts
September 2007
-50bp
✔️
Context: Amid a housing crisis, a 50bp cut was made, totaling 10% in rate cuts
July 2019
-25bp
❌
Context: “Mid-cycle adjustment” rate cut amid economic growth, totaling 3% in rate cuts
March 2020
-50bp
✔️
Context: Amid the pandemic, a rapid 50bp rate cut occurred, followed by a total 100bp cut by the FOMC
The post first appeared on HTX Square.
