Will interest rate cuts really bring about a bull market?

On August 23, Bao revealed that the policy has a tendency to change to lower interest rates, and everyone felt that the interest rate cut in September has become an inevitable event. As a result, retail investors blindly followed suit, but forgot historical experience - the Fed's interest rate cuts are usually a necessary means to deal with economic crises.

Interest rate cuts do not necessarily bring about an immediate rise in the risk market. On the contrary, in most cases, it is a decline.

Usually, interest rate cuts mean declines, because in the history of the United States, most interest rate cuts are accompanied by economic recessions. Although interest rate cuts are intended to alleviate recessions, they cannot fundamentally solve the recession problem. Therefore, from the perspective of long-term data, in most cases, the risk market is in a downward trend when interest rates are cut.

However, interest rate cuts represent a process, and may even be a long process of 16 months or more. In this process, as the economy changes, there may be different development trends. For example, in the early stage of interest rate cuts, if it does not trigger an economic recession, the market may not be too pessimistic. Because the market expects interest rate cuts, it will react in advance, and when the interest rate cut actually occurs, users may choose to sell.

From the perspective of the election, according to historical data, during most elections, the risk market rose for a total of five months, two months before and after the election. There is even a saying that the more it fell before the election, the higher it rose after the election. Of course, this is just a historical summary. There have been elections and economic recessions in history, but the trend during the election was indeed relatively good.

Therefore, I think as long as the economy does not decline in 2024, there is still a great possibility that factors such as the year-end election, halving, interest rate cuts, and FASB will ferment together.