Recently, everyone is looking forward to interest rate cuts, but many people are still unclear about why interest rate cuts have a positive impact on the market.

The following points explain the market effects of interest rate cuts:

Increased liquidity: Interest rate cuts mean lower borrowing costs, which usually increases liquidity in the market, thereby promoting consumption and investment.

Investment transfer: Interest rate cuts usually lead to lower yields on fixed-income investments (such as bonds), which prompts many investors to shift their funds to markets with higher yields.

Inflation expectations: Interest rate cuts may trigger inflation expectations because more money flows into the market and demand for goods and services increases.

If the market expects inflation to rise, investors may buy assets to hedge against inflation, which will drive the market up.