Fed Rate Cut Analysis $Spy
Stocks usually fall ~15% within 12 months following the 1st cut if there is a recession.
If no recession, stocks rise by >10%.
The volatility that dominated markets in the early part of the month sharply reversed in the past week, driven by growing expectations of interest rate cuts that have bolstered investor risk appetite.
The latest batch of inflation statistics for August have given the green light for the Federal Reserve to proceed with an interest rate cut, which is highly likely to occur on Sept. 18.
The remaining question concerns the size of the cut — whether it will be 25 basis points or 50 basis points — though market consensus and recent comments from Fed officials suggest the more conservative 25 basis points is the likely scenario.
Some consolidation around the current levels could not be ruled out before the Fed’s interest-rate announcement, scheduled for Wednesday. While some call for broadening of the market rally, with tech stocks likely to add on to their gains, others draw cues from history, which shows that the market typically collapses after a rate cut. Regional manufacturing activity data could also impact the market direction of the day.
If no recession, stocks rise by >10%.
The volatility that dominated markets in the early part of the month sharply reversed in the past week, driven by growing expectations of interest rate cuts that have bolstered investor risk appetite.
The latest batch of inflation statistics for August have given the green light for the Federal Reserve to proceed with an interest rate cut, which is highly likely to occur on Sept. 18.
The remaining question concerns the size of the cut — whether it will be 25 basis points or 50 basis points — though market consensus and recent comments from Fed officials suggest the more conservative 25 basis points is the likely scenario.
Some consolidation around the current levels could not be ruled out before the Fed’s interest-rate announcement, scheduled for Wednesday. While some call for broadening of the market rally, with tech stocks likely to add on to their gains, others draw cues from history, which shows that the market typically collapses after a rate cut. Regional manufacturing activity data could also impact the market direction of the day.
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