Fed Rate Cut – Target Probabilities at the Fed’s FOMC Sept. 18 Meeting Today, traders see a 0.4% probability of a 50-bps rate cut and a 99.6% probability of a 25-bps rate cut at the Fed’s FOMC September 18 meeting. Picture source: CME Group
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
Russel 2000 Index/Russel 1000 Index Around First Fed Rate Cut: Recession vs. No Recession Another great chart suggesting no recession in the next 12 months, and large caps should outperform small caps. 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
Fed Rate Cuts Boost Consumer Spending The chart shows real PCE around first Fed rate cut: recession vs. no recession. Fed rate cuts are more effective during a recession. Picture source: Ned Davis Research
10-Year/2-Year Treasury Yield Curve Around First Fed Rate Cuts The chart shows that the 10-Year/2-Year Treasury yield curve usually steepens around the first Fed rate cut. Picture source: Ned Davis Research
S&P 500 Dividend Payers / Non-Payers Around First Fed Rate Cut The chart shows that S&P 500 dividend payers have outperformed non-payers around the first Fed rate cut and 12 months later, because they are more attractive than bonds. Picture source: Ned Davis Research
First Fed Rate Cut History tells us that a first 25-bps rate cut is bullish, while a first 50-bps rate cut is bearish. You may also like “U.S. Equities – One Year Return After a Fed Rate Cut.” Picture source: Ari Wald
