Bold question and should certainly raise some eyebrows but let's look at the complete picture. This chart displays Dow Jones (DJI) and the Federal Reserve Interest Rate (blue trend-line) on the 1M (monthly) time-frame.
I will make it quick to save us time and then each person can individually make their own conclusions from the chart. The combination of the Fed raising the rates since the start of the with Dow dropping, hasn't been seen often historically on this data set dating back to June 1954. In fact historically, Dow (stock markets in general) tend to rise along with rates. Some times (4 in history) when the Rate Cut happens, Dow drops as well. Most of the times the stock rally continued without a major drop even after the Rate Cuts.
Basically the only time on this data-set that resembles today (assuming the Fed pauses or cuts in 2023) is 1969/70, 1972-74 and 1983/84, with the latter largely associated with Fed Chair Volcker monetary practices. During those periods, Dow started falling as the Rate was rising and then dropped after the Rate cut.
Do you think we are repeating such a period? Will a Rate Cut in the near future do more harm than good to the stock market?
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I don’t think you understand why rate cuts are important and what their intended effect is. It will of course have a “negative effect” on the market in terms of price action, as intended. Rate hikes make borrowing money more expensive to hedge funds leveraging their positions. So it will naturally have a negative effect on price action. “Harm” in this case is relative. If rates aren’t raised, then inflation will spin out of control, and THAT is where the real harm comes in.
Wishful thinking my friend. Terminal rate well beyond the 5-5.25 consensus. Inflation’s here to stay little longer than people think…
snipdapipz
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Love the post, such a good analysis
talisman308
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at the market ther is big spiculation. that is why markt is not go down. it is not normlal hiden hand make market go up and it is rise the infilatio. the infilathion go up day by day FED told the will be soft landdin but hiden and make market up. market must go down for the make infilation donwn ... price is go up and up in all goods
CBKWahoo
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If you take the march 2020 coof crash and add it on to this one we have already had the equal to the 2008 crash, Im not too convinced quite yet the market will continue to the downer side especially with the dxy tanking shows to me the money is flowing back into the markets.
Imdmagic1
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Yep...but it depends on how you define "Harm". Most of these stocks (QQQ stocks in particular) have been propped up by ZIRP and Govt Subsidies. Their wealth has grown, while our collective balance sheet has become bloated. Unwinding this is important for the nation, albeit a detriment to the markets.