Market Returns Post Interest Rate Cuts
SUMMARY. Below is a table of returns post past Emergency Rate Cuts. Yesterday the Federal Reserve reduced the Fed Funds rate (short term borrowing rate) by 50 basis unexpectedly. Meaning they did not cut rates as per post their normal monthly meetings. In either 6 month or 1 year post such cuts the S&P 500 has on average been DOWN or seen negative returns. That's history and does not mean it will repeat. It highly depends whether the Fed is early in cutting rates or late ie reacting to already weakened economy.
INVESTMENT IMPACT. We continue to weigh the above in continuing to selectively increase our equity exposures. Our view is the virus impact on growth is temporary and may lead to accelerated growth in 2H20 into 2021 especially as monetary policy loosens further. Having said that equity exposures especially in the growth models remain lower than targeted amounts.
For more insights see our website and disclosures found there at BCA. As always contact us for further explanation of how these events can effect your finances.