Let’s talk about something different because last night Powell made it very clear that “cutting the CPC policy in September may be under consideration.” So if it comes true, everyone may be thinking that this is a good thing. Then 10, 11, and 12 will rise sharply. But historical data Don't say that
The picture is the historical SP500 and Fed interest rate trend chart
A refresher on what happened before interest rate cuts in the past
*The dot com bubble before 2002
*Financial crisis before 2008
*COVID 19 of 2019
In the past few times, it was because the economy was hit hard that the Federal Reserve had to cut interest rates to rescue the economy. The bad economy will directly reflect on the stock market, and the stock market will fall, and there will be a lag effect.
The previous interest rate cuts were mainly to save the economy, but this time it is different. This time the interest rate cut is precautionary and aims to prevent the market from deteriorating further. If there is no major black swan event before September, this rate cut may break the trend of history repeating itself.
It’s worth noting that Goldman Sachs analyst Scott Rubner was bullish on a possible stock crash in August, and now that the market is a bit unstable at the end of July, the situation seems to be shaky.
*Hysteresis effect*
To put it simply, it’s a time difference. The outflow of money cannot be replenished immediately. Let’s take a simple example. For example, if I give you one million today and tell you to open a store, and ask you to give birth to 1 million next month to repay me, can you do it? It’s difficult because you need to train your employees, build relationships with customers, and be familiar with what customers like to eat, so it’s difficult to give me the money right away, but you may be able to give me this amount of money in one go half a year or a year later.
The above are my views on interest rate cuts. You can consider them yourself for your reference.
