Stock markets are likely to react decisively after a cut to interest rates if history repeats itself, according to a
Pro analysis. The U.S. central bank is expected to keep interest rates steady this week but could hint at relaxing its monetary policy stance as soon as September. Any September decision to lower the Fed's target range would be the first time interest rates have fallen since the hiking cycle began in March 2022.
Pro analyzed stock market data over the past six tightening cycles since 1982, when the Federal Reserve switched to targeting the federal funds rate. The analysis found that, on four occasions the S & P 500 had risen by double digits within a year after a rate cut The analysis also revealed that the S & P 500 had set the direction of travel for annual returns within three months after a rate cut.