NEW YORK - Not all U.S. rate-cutting cycles are created equal, at least when it comes to how the stock market reacts.
As recently as last week, markets were pricing in a greater than 90% probability that the Fed will shave another quarter point from its overnight lending rate, which is currently set in a range of 2.00% to 2.25%. After a year, the benchmark S&P 500 rose an average of 20.4% during insurance cycles, while the index fell an average of 10.2% during pre-recession cycles, according to Allianz.
Following a second rate cut in a cycle, which Wednesday’s would be, the Dow Jones Industrial Average has gained an average of 20.3% one year later, according to Ned Davis Research.