Fed Rate Cut – Target Probabilities at the Fed’s FOMC Oct. 30 Meeting Traders see a 87.1% probability of a 25-bps rate cut at the Fed’s FOMC October 30 meeting. Picture source: CME Group
S&P 500 Index Pre and Post Fed Rate Cuts This chart shows what the market has done every time the Fed cut rates since 1984. One step closer to recession? Picture source: UBS
Dow Jones Industrial Average Around Second Fed Rate Cut This chart shows that a second rate cut has been bullish. On average, the Dow Jones Industrial Average has gained 19% over the next 12 months. Picture source: Ned Davis Research
Fed Rate Cut vs. ISM Manufacturing Index and ISM Non-Manufacturing Index Since 1997, when the ISM Manufacturing Index is below 50 and the ISM Non-Manufacturing Index is above 52, the Fed is less aggressive, with about 68bp of easing on average. Picture source: Goldman Sachs Global Investment Research
Fed Rate Cuts Priced In and Recession Insurance cuts or recessionary cuts? It usually doesn’t end well, when the bond market begins to price in more than three rate cuts over the next 6 months. Picture source: Societe Generale Cross Asset Research
U.S. Equities – One Year Return After a Fed Rate Cut The chart shows how U.S. equities have historically performed after a 25 bps and 50 bps Fed rate cut over the last 35 years. You may also like “First Fed Rate Cut.” Picture source: Ycharts
Russell 2000 Index/Russell 1000 Index Around First Fed Rate Cut: Recession vs. No Recession Another great chart suggesting no recession, when large caps outperform small caps, around first Fed rate cut. Picture source: Ned Davis Research
S&P 500 Consumer Discretionary / Industrials Around First Fed Rate Cut If consumer discretionary outperforms industrials after first Fed rate cut, then it could signal a recession. Picture source: Ned Davis Research
Earnings Revisions Strategy Outperforms Around First Fed Rate Cut Around first Fed rate cut, earnings revisions is the top factor out of 200 strategies. Picture source: Ned Davis Research
S&P 500 After Initial Fed Rate Cuts Outside Of Recession When the Fed cuts rates without a recession, the S&P 500 Index tends to go higher. Average gain since 1984: +11.1% six months later and 15.8% twelve months later. Picture source: LPL Financial LLC
