Once the Federal Reserve enters an interest rate cut cycle, the probability of a mad bull market will significantly increase, indicating that 2025 may become a strong candidate for the year of the mad bull. However, there are mixed voices in the market. Some people believe that the prelude of the bull market may be played before the first interest rate cut. The reason is that the realization of interest rate cut expectations is often accompanied by the risk of market adjustment. The trend of US stocks is a lesson learned from the past. However, not all observers are betting that next year will be the first year of the bull market. Some bloggers even predict that 2025 may be the end of the bull market, and the bull market craze may have quietly ebbed.

It is true that there is still uncertainty about the market performance in 2025. In the next few years, this bull market may continue, and it may even open a new chapter of long-term prosperity. However, subtle changes in interest rate cut expectations are undoubtedly one of the key factors affecting market trends. Once they emerge, market fluctuations are inevitable.

Looking back at history, it is not difficult to find the subtle correlation between interest rate cutting cycles and market performance. Taking 2019 as an example, the Federal Reserve started cutting interest rates in July. Over the course of several months, the federal funds rate was gradually lowered until it fell to a level close to zero in March of the following year. Interestingly, although expectations of interest rate cuts have long been brewing, the carnival in the currency circle only fully bloomed at the end of the interest rate cut cycle, that is, in April of the following year.

In view of this, we have reason to speculate that if the interest rate cutting cycle starts in 2025, and assuming that the interest rate cutting process starts in September this year and continues for more than a year, then this bull market wave may become more turbulent. As a shot in the arm for the market, interest rate cuts take time to fully unleash their effects, just as the last round of interest rate cuts took eight months to show results.

The road to this round of interest rate cuts is expected to be longer, because the current interest rate has climbed to around 5.5%, and may need to be gradually lowered to 2% or even lower levels (such as 1.5%, 1% or even 0.25%) in the future to ensure the smooth operation of the economy. During this process, every pulse of the market deserves our close attention.

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