Video: Is a Fed rate cut good news or bad?
We’re in a situation where bad news is seen as good news in financial markets. Investors in stocks and bonds are optimistic about the prospect of slower economic growth and lower inflation, despite these being typically unfavorable for equity investments. The hope is pinned on the possibility of the Federal Reserve cutting interest rates.
Traditionally, stocks thrive during Fed rate hikes, signaling a robust economy. However, the inverse holds true when the Fed starts cutting rates. This makes sense as rate cuts usually indicate economic concerns and a potential recession.
In a brief video, we demonstrate how the S&P 500 has corrected in the last four instances when the Fed cut rates after a prolonged rise. It’s noteworthy that while the Fed hasn’t cut rates yet, the market is forecasting a cut around March 20/23.
Stay tuned!