{"id":29150,"date":"2024-08-13T23:56:00","date_gmt":"2024-08-13T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=29150"},"modified":"2025-09-21T10:24:20","modified_gmt":"2025-09-21T02:24:20","slug":"market-rise-after-rate-cut","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/","title":{"rendered":"Will Fed rate cut gurantee stock market rise?"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Investment_bank_research_reports\" >Investment bank research reports<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Research_report_by_TS_Lombard\" >Research report by TS Lombard<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Wells_Fargo_Investment_Institute_WFII\" >Wells Fargo Investment Institute (WFII)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Strategas_Securities\" >Strategas Securities<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#The_Fed_is_embarrassed\" >The Fed is embarrassed<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Its_not_easy_to_manage_the_timing\" >It\u2019s not easy to manage the timing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Recession_causes_corporate_earnings_to_fall\" >Recession causes corporate earnings to fall<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Interest_rates_affect_corporate_profits\" >Interest rates affect corporate profits<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investment_bank_research_reports\"><\/span>Investment bank research reports<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Research_report_by_TS_Lombard\"><\/span>Research report by TS Lombard<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>TS Lombard believes that it all depends on whether the economy is facing a recession. In a report to clients on August 9, 2024, he wrote that &#8220;lowering interest rates is usually in response to the economy heading into a recession.&#8221;<\/p>\n\n\n\n<p>To emphasize this point, TS Lombard&#8217;s team tracked the performance of the S&amp;P 500 during past Fed rate cut cycles from 1984 to 2019 (see graphics 1 below): In the days after the first rate cut, the stock market averaged rose, but within weeks of the first rate cut, stocks also began to fall as the economy slumped.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"760\" height=\"627\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/TS-Lombard.jpg\" alt=\"\" class=\"wp-image-29154\" srcset=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/TS-Lombard.jpg 760w, https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/TS-Lombard-300x248.jpg 300w\" sizes=\"auto, (max-width: 709px) 85vw, (max-width: 909px) 67vw, (max-width: 984px) 61vw, (max-width: 1362px) 45vw, 600px\" \/><figcaption class=\"wp-element-caption\">Graphics 1 Source: OECD, Bloomberg, TS Lombard<\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>Investors are increasingly optimistic about the prospect of a rate cut from the Federal Reserve, but &#8220;stocks typically rise after the first rate cut only if a recession is avoided.&#8221;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Wells_Fargo_Investment_Institute_WFII\"><\/span>Wells Fargo Investment Institute (WFII)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In a report dated June 18, 2024, WFII investment strategist Austin Pickle plotted the returns of the S&amp;P 500 and the number of days between the first Fed rate cut in a cycle and the subsequent low for the index (graphics 2).<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"608\" height=\"340\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/wfc.jpg\" alt=\"\" class=\"wp-image-29158\" srcset=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/wfc.jpg 608w, https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/wfc-300x168.jpg 300w\" sizes=\"auto, (max-width: 709px) 85vw, (max-width: 909px) 67vw, (max-width: 984px) 61vw, (max-width: 1362px) 45vw, 600px\" \/><figcaption class=\"wp-element-caption\">Graphics 2: S&amp;P 500 returns after rate cuts and days between index lows<\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>He found that since 1974, the average decline in the index in the 250 days after the Fed&#8217;s first rate cut was about 20%. He said: In other words, investors should not equate the first rate cut with a signal that the stock market is disarming.<\/p>\n\n\n\n<p>Deutsche Bank<\/p>\n\n\n\n<p>Analysts at Deutsche Bank have tracked interest rate cut cycles since 1955, 10 of which were associated with recessions. Two rare exceptions occurred in the late 1960s and 1980s. Deutsche Bank strategist Jim Reid wrote in a report on January 15, 2024: &#8220;Historical data shows that the Federal Reserve cuts interest rates by more than 150 basis points within one year, almost all of which are due to economic recession. If the U.S. economy does not fall into recession, Historical precedent shows that the threshold for a 150 basis point rate cut within 12 months is high.\u201d<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Strategas_Securities\"><\/span>Strategas Securities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According to data from Strategas Securities, in the previous eight currency tightening cycles, the S&amp;P 500 rose an average of 13% per year after the last interest rate hike, as shown in Graphics 3 below. (Please note: Annualized returns on the S&amp;P 500 are approximately 10%!)<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"382\" height=\"185\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/OneYearReturn-Custom.jpg\" alt=\"\" class=\"wp-image-29162\" srcset=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/OneYearReturn-Custom.jpg 382w, https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/OneYearReturn-Custom-300x145.jpg 300w\" sizes=\"auto, (max-width: 382px) 85vw, 382px\" \/><figcaption class=\"wp-element-caption\">Graphics 3: Average annual gain in the S&amp;P 500 since the last rate hike<\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Fed_is_embarrassed\"><\/span>The Fed is embarrassed<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Its_not_easy_to_manage_the_timing\"><\/span>It\u2019s not easy to manage the timing<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In fact, the Fed has been studying what happened in the 1970s, when the Fed relaxed monetary policy prematurely, causing inflation to quickly rekindle. It is not easy to time the interest rate cut. If you are not careful, you may repeat the tragedy of the 1970s.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Recession_causes_corporate_earnings_to_fall\"><\/span>Recession causes corporate earnings to fall<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><a href=\"https:\/\/www.nber.org\/research\/data\/us-business-cycle-expansions-and-contractions\" target=\"_blank\" rel=\"noreferrer noopener\">During an economic recession<\/a>, corporate earnings indeed show a sharp decline, as shown in Graphics 4.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"320\" height=\"189\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/\u7d93\u6fdf\u8870\u9000\u6b77\u53f21957-2020-Custom.jpg\" alt=\"\" class=\"wp-image-29167\" srcset=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/\u7d93\u6fdf\u8870\u9000\u6b77\u53f21957-2020-Custom.jpg 320w, https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/\u7d93\u6fdf\u8870\u9000\u6b77\u53f21957-2020-Custom-300x177.jpg 300w\" sizes=\"auto, (max-width: 320px) 85vw, 320px\" \/><figcaption class=\"wp-element-caption\">Graphics 4: Comparison of U.S. recession periods and corporate earnings declines<\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Interest_rates_affect_corporate_profits\"><\/span>Interest rates affect corporate profits<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Andrew Lapthorne, quantitative strategist at Societe Generale, said: &#8220;Falling profits and falling interest rates tend to be closely related,&#8221; as shown in Graphics 5.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"423\" height=\"228\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/Rate_EPS-Custom.jpg\" alt=\"\" class=\"wp-image-29171\" srcset=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/Rate_EPS-Custom.jpg 423w, https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/Rate_EPS-Custom-300x162.jpg 300w\" sizes=\"auto, (max-width: 423px) 85vw, 423px\" \/><figcaption class=\"wp-element-caption\">Graphics 5: Interest rate and corporate earnings trends comparison chart<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An economic recession will indeed lead to a reduction in corporate income; as a company&#8217;s revenue decreases, the stock price will of course fall accordingly. The Federal Reserve will also be forced to cut interest rates to stimulate the economy, but it will not immediately have an impact on improving economic prosperity.<\/p>\n\n\n\n<p>In short, &#8220;cutting interest rates does not necessarily 100% make the stock market rise.&#8221;<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"178\" height=\"100\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/08\/rate_market-Custom.jpg\" alt=\"rate cut\" class=\"wp-image-29151\"\/><figcaption class=\"wp-element-caption\">credit: Ideogram<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/09\/20\/indicators-interpret-market\/\">Indicators helps to interpret the direction of stock market and economic climate<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.bing.com\/search?pglt=299&amp;q=US+credit+rating+downgrade+by+Fitch%2C+the+reasons+and+implications&amp;cvid=a98b4c4ac7554a71b331287330439829&amp;gs_lcrp=EgRlZGdlKgYIABBFGDkyBggAEEUYOTIHCAEQ6wcYQNIBBzgzN2owajGoAgCwAgA&amp;FORM=ANSPA1&amp;PC=CNNDDB\" target=\"_blank\" rel=\"noopener\">US credit rating downgrade by Fitch, the reasons and implications<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/13\/market-rise-after-rate-cut\/\" target=\"_blank\" rel=\"noreferrer noopener\">Will Fed rate cut gurantee stock market rise?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/09\/29\/inflation-and-rate\/\">Tax, inflation and rate are the top three serious killers to investors<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/14\/stock-prices-vs-inflation\/\">Why do stock prices automatically rise with inflation?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/19\/us-inflation-rate-querier\/\" target=\"_blank\" rel=\"noreferrer noopener\">Querier of US Inflation Rate<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/27\/inflation-reduction-act\/\">The impact of the Inflation Reduction Act on US stocks<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/06\/12\/inflation-proof-investments\/\">Inflation-proof investments<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/27\/inflation-reduction-act\/\">The impact of the Inflation Reduction Act on US stocks<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/06\/26\/gdp-and-stock-prices\/\">The relationship between GDP and stock prices<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/29\/us-gross-domestic-product-gdp-querier\/\">US Gross domestic product (GDP) querier<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/07\/04\/how-investors-should-look-at-economic-trends-and-forecasts\/\">How investors should look at economic trends and forecasts?<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>An economic recession will indeed lead to a reduction in corporate income; as a company&#8217;s revenue decreases, the stock price will of course fall accordingly. In short, &#8220;cutting interest rates does not necessarily 100% make the stock market rise.&#8221;<\/p>\n","protected":false},"author":1,"featured_media":29151,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[407,405],"tags":[],"class_list":["post-29150","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-interest-rate","category-inflation"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/29150","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=29150"}],"version-history":[{"count":17,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/29150\/revisions"}],"predecessor-version":[{"id":38709,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/29150\/revisions\/38709"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/29151"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=29150"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=29150"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=29150"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}