After over a year of speculation and anticipation, the Federal Reserve has finally initiated its long-awaited easing cycle. In a decisive move, the Fed exceeded market expectations by slashing its benchmark interest rate by a substantial half a percentage point. This aggressive reduction signals a strong commitment to stimulating economic growth and mitigating potential risks in the economy.
What does history tell us after a rate cut
This table reflects the S&P 500's performance in the 12 months following Federal Reserve rate cuts.
Recession Years (1990, 2001, 2008, 2020): S&P 500 performance was mostly negative, reflecting the economic downturns and uncertainties post-rate cuts.
Non-Recession Years (1995, 1998, 2019): The S&P 500 saw strong gains after rate cuts, driven by economic growth and investor optimism
What does TA show now
As per my previous post, once the S&P 500 breakout of the previous high and stay there, high probability of it keeping the upward momentum.
What will I be doing
This is to remind me on what to do when the scenarios below happen, and this is not a recommendation for you as everyone of us have a different financial situation.
1. As S&P 500 has gaped up and broken the resistance, will buy when there is a dip.
2. Maintain a reasonable stock, bond and cash allocation so that in the event of a prolong downturn, I will not be force to sell my stocks as the cash portion will tie me through.
3. If the long term TA indicators show weakness, will take some money off the table first, incase it becomes another 2000/2001 or 2008 crash.
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