What the stock market does historically after the first Fed rate cut

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How the S&P 500 performs after the central bank lowers rates depends on where the economy is headed next.

With the Federal Reserve expected to make its first interest rate cut in four years Wednesday, it's time to take a look at how stocks performed at the start of prior easing cycles. Expectations are running high for the market's already strong performance this year to continue after the Fed slashes rates. The S & P 500 touched a record high on Tuesday , bringing its year-to-date gain to more than 18%.

In the years when the S & P 500 experienced no recession during or soon after the first reduction — such as in 1984, 1989, 1995 and 1998 — the benchmark was higher 100% of the time three, six and 12 months later. On average, the broader index jumped 10.2% three months later, 14.7% six months out, and 18.6% one year afterward. .SPX YTD mountain S & P 500, ytd Other investment banks have noted this discrepancy, with Bank of America Securities also highlighting the pattern in a recent note.

 

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