Investors don't need to worry that the market got out over its skis on interest rate cuts, according to Bank of America. The S & P 500 rallied to all-time highs this week after the Federal Reserve issued its first interest rate decrease in four years. Rate cuts are typically considered good news for investors because the action lowers the cost of borrowing money, which can in turn juice corporate profits.
"Concerns that equities have 'front-run' the Fed are ill founded, in our view," Subramanian said in a note to clients published Friday, two days after the central bank announced its cut of 50 basis points. Said another way, when looking historically, Subramanian found "no relationship" between returns ahead of the Fed's first cut and 12-month forward performance.