The market is worried that the Fed's interest rate cut will cause the market to adjust further based on historical data. However, this may be more of a cause for celebration than a cause for concern.
In fact, not every interest rate cut causes the market to decline. Look at the following statistics:
- Of the 4 interest rate cuts in the 21st century, the stock market fell immediately in the last 2 times. However, the price increase performance in the following months was extremely impressive.
- While the previous 2 times, the S&P 500 increased in price immediately after the first interest rate cut and both times led to recessions in 2001 and 2008.
The first interest rate cut by the FED always brings fluctuations and impacts on the global economy. With the current situation, the FED will have to cut interest rates in 2024 to ease the risk of economic recession.
With the media hype and investors becoming more sensitive to news and volatility, the post-rate cut period could see a huge influx of money into financial markets.
