History is always strikingly similar, but it will not simply repeat itself. Review of the Fed's rate hike and rate cut cycles. This time, the Fed must cut interest rates by 50BP to defeat the recession expectations.
So I am still optimistic about the Fed's rate cut this time, and I think the pullback from one day before the rate cut to October 15 is still a good buying opportunity.
Review of the rate hike cycle: The Fed's rate hike cycle that began in 2022 is a rare rate hike cycle in history. It lasted for two years and six months, with a total rate hike of 525 basis points.
The rate cut cycle has begun: It is difficult to find a completely comparable example in history for the current rate cut cycle. Although inflation has returned to the vicinity of the Fed's target, it may be an adjustment rate cut, but the job market has shown signs of weakening, which is noteworthy in history.
Analysis of previous historical rate cut cycles:
2019 rate cut: It started in a slightly weaker economic environment, faced the risk of trade friction, and was affected by political pressure. At that time, Fed Chairman Powell was under pressure from Trump when making decisions. Growth slowed after the rate cut but did not fall into recession. U.S. stocks hit a new high after a brief decline of more than half a month after the rate cut.
2007 rate cut: It started at a time when credit risk events were frequent, which is different from the current situation. After the rate cut began, the real estate bubble burst, and the subprime mortgage crisis plunged the United States into recession.
1995 rate cut: At that time, inflation fell from a high level and the unemployment rate curve was flat, which is somewhat similar to the current situation. This time the economy had a soft landing and the stock market performed well.
FOMC meeting analysis: There are differences within the Fed on the extent of the rate cut. The content of the FOMC meeting should be divided into three parts: the extent of the rate cut, the 24-year dot plot, the 25-year unemployment rate forecast" and the "press conference", and it should be centered around "Does the Fed think the economy has problems?" If the Fed wants to cut interest rates by 50BP, it must defeat the recession expectations.
