Financial Planning Fridays #106: Market Performance After the Fed Cuts
With the Federal Reserve expected to begin cutting interest rates, Presilium reviews how the S&P 500 has historically performed after prior rate-cutting cycles began since 1980. Historically, average returns following the start of rate cuts have been positive across one-, three-, and longer-term horizons, though past patterns may not repeat. Past performance does not guarantee future results; this is educational, not investment advice.
With the Federal Reserve expected to begin cutting interest rates, Presilium reviews how the S&P 500 has historically performed after prior rate-cutting cycles began since 1980. Historically, average returns following the start of rate cuts have been positive across one-, three-, and longer-term horizons, though past patterns may not repeat. Past performance does not guarantee future results; this is educational, not investment advice.
Key takeaways
- The Fed was expected to cut rates for the first time in over four years.
- Since 1980, average stock returns after rate cuts began have historically been positive.
- Historical averages are context, not a guarantee of future results.
- Staying invested through rate-cycle shifts has generally served long-term investors well.
The Federal Reserve is expected to cut interest rates for the first time in more than 4 years at their next meeting this month. We wanted to share with you how stocks have performed after the federal reserve has previously begun cutting interest rates since 1980. As you can see, the average returns have been quite good following the start of rate cutting cycles about 9% for 1 year, 17% for 3 years, and 17.4% for 5 years. The Federal Reserve cuts interest rates to lower borrowing costs for individuals and companies and encourage additional investing and spending. This has led to better than average returns since 1980 over the following 3- and 5-year periods. However, the results have varied widely with a return of less than 1% per year over the 5 years following the 2001 rate cut as the tech bubble burst all the way up to an average return of 37% per year after the 1995 cut before the internet took off. As always, we at Presilium remain optimistic, but we are also ready to seize opportunities for our clients, regardless of the outcomes from this new rate cutting cycle. Thank you and we look forward to talking with you next Friday. Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.
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