How do stocks, bonds and cash perform when the Fed starts cutting rates?
"New long-term analysis digs into returns during 22 rate-cutting cycles since 1928."
"In the 12-months after the US Federal Reserve (Fed) starts cutting interest rates, the average return from US stocks has been 11% ahead of inflation. Stocks have also outperformed government bonds by 6% and corporate bonds by 5%, on average."
"These returns are even more impressive considering that, in 16 of the 22 cycles, the US economy was either already in a recession when cuts commenced, or entered one within 12 months."
"Stock returns were better if a recession was avoided but, even if it wasn’t, they were still positive on average."
"There are big exceptions, and a recession is obviously not something to be welcomed but – for stock market investors – it has not always been something to unduly fear either."
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