Outlook for the fourth quarter: Analysis of the trend of US stocks and Bitcoin in the interest rate cut cycle

There is no doubt that interest rate increases and cuts are the macro factors that have the greatest impact on the trading market. The currency circle has only experienced it once in 2019, and the peak was reached at the first interest rate cut, but the sample size is too small, so we still use the Nasdaq as a reference

Based on the data of the past 40 years, there is roughly an interest rate cut cycle every 10 years or so, in 1989, 2000, 2007, and 2019. There are several important conclusions

1. During the interest rate cut period, the US stock market will inevitably plummet. In 1989/19, the decline was 32%. There were crises in 2000 and 2007, and the decline was more than 50%. The decline was smaller in soft landing and huge in hard landing.

2. The market peaked not at the first interest rate cut. To be precise, it peaked around the second and third interest rate cuts, except in 2000 when the stock index had already fallen sharply before the emergency interest rate cut.

3. Since 2017, BTC has never been spared during the Nasdaq's plunge, and it will basically follow. Of course, after the interest rate cut, the index has ushered in a sharp rise.

In summary, the market has experienced a sharp rise before the interest rate cut, so it is difficult to avoid a correction during the interest rate cut. The extent of the correction will depend on whether the US economy has a soft landing or a hard landing; and BTC has soared all the way before the interest rate cut in 2019, fully PRICE IN, so the peak will be reached when the interest rate is cut. The difference is that this year BTC has been sideways for nearly 6 months before the interest rate cut, and it continues to rise in August and September. What should be more careful is the trend before and after the second and third interest rate cuts, that is, from October to December. If BTC still cannot reach a new high during this period or the new high is not far away, then the risk of peaking should be considered.