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The Fed won't save stocks, sell the first rate cut, says Stifel

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'Fed cuts are a red herring,' Stifel strategists said. 'We have our doubts about the currently widespread belief that 'Fed Cuts=Buy Stocks.''

Think rate cuts will save the bull market? Think again, according to Stifel. "Fed cuts are a red herring," Stifel strategists said in a note to clients. "We have our doubts about the currently widespread belief that 'Fed Cuts=Buy Stocks.'" Markets are expecting the central bank to lower benchmark rates by at least a quarter percentage point in a few weeks, which could give the stock market a much needed boost after a volatile period.

An inverted yield curve has signaled most recessions since World War II. A normalization of the curve usually takes place before a recession hits, meaning the U.S. could still be in for some rough economic waters ahead. "Economic slowdowns have always been preceded by bottoming 10Y-2Y 'bull steepening' yield curves," Stifel said. "Bull steepening yield curves have historically led to the weakest stock markets.

 

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