Fed Rate Cut – Target Probabilities at the Fed’s FOMC Oct. 30 Meeting, as of Oct. 11, 2019 Today, traders see a 75.4% 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
Central Bank Rate Cuts Leads Global Manufacturing PMI This chart suggests that the net number of central banks cutting rates leads global manufacturing PMI by 8 months. Picture source: J.P. Morgan
10Y-3M Treasury Yield Spread After First Rate Cut and Recessions After the first Fed rate cut, a steepening of the U.S. 10Y-3M yield spread could suggest a recession is coming. Picture source: Charles Schwab
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
S&P 500 Performance When the First Two Rate Cuts Are 25 Basis Points Over 40 years, the S&P 500 returns over 6 and 12 months were all positive when the first two rate cuts were 25 bps. Picture source: Ryan Detrick, LPL Financial LLC
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. Leading Economic Indicators (LEI) and Fed Insurance Rate Cuts This chart shows that Fed insurance rate cuts can be good news when the U.S. economy slows down. Picture source: Scotiabank
Performance of S&P 500 Around the First Late-Cycle Rate Cut After the first-rate late-cycle cut, the S&P 500’s performance is generally not exceptional. Picture source: Societe Generale Cross Asset Research
