Here's What Happens to the Stock Market After the Fed Cuts Rates

FedEx's CEO admitted some truth about the Fed's rate cut this week, and the stock was immediately punished for it, dropping 15% on Friday. This raises a bunch of questions, starting with: what happens to stocks in general when the Fed cuts rates? The answer is not what you think.

Eurodollar University's Money & Macro Analysis

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Robert Shiller 2013 Nobel Speculative Asset Prices

[V.stones]

Historically, rate cuts usually push stocks up in the short term. Cheaper borrowing often leads to increased spending by companies and consumers. But sometimes, it's not that simple. If they cut rates because the economy's slowing down, that can send mixed signals

[teezzmegee]

Can't we just have a crash already, this is getting too depressing!

[PapiChulo-ts]

Everyone is screaming market crash and it's getting me worried. How can I protect my investment portfolio of around 800K. I don't want to get burnt out.

[patrickl]

I disagree that QE doesn't directly boost share prices.

By doing QE the Fed buys up supply of US Gov debt issuance thereby increasing demand and reducing long-term US Gov bond yields. Corporate AAA bond yields compete 'directly' with US Gov bond yields by offering a 'relatively' higher yield for a low but not entirely risk free rate. When US Bond yields are suppressed, So too are corporate bond yields. And this allows companies to borrow more at lower interest rates, which puts more cash on their balance sheet. And of course more cash equals more share buybacks, etc.

So Yes, Fed QE = More cash and liquidity into markets

[tradermunky]

It never seems to click with the vast majority that a Fed that is always behind the curve can't possibly be affecting that same curve.

[albertteng]

Ha? Sorry but if fed cut rates, people flock to the stock market. Its that simple. Already we are seeing many stock markets around the world rallying, breaking out

[jasondillon]

I am SO glad you break all of this down and shed light on the lies. I knew early on that stock prices aren't real and instead directly reflect what investors BELIEVE about the stock/market. This is proof that the Fed also knows it, and takes advantage of people's emotions.

[wagashiohagi]

FDX was trading at it's all time high. Share price has doubled in just the past two years.

Jeff doesn't pick cherries if they don't fit his failed thesis.

[briannewman]

Are we sure that QE does not inflate asset prices?
Is the belief that QE inflates asset prices able to explain the increase in asset prices that are apparently correlated with QE?

[JSniderDebunkedgoldspansubstak]

Jeff "I am What Happens When You Fail Out of the Investment World" Snider. Debunked.

[wagashiohagi]

8/2/20 Video Titled "The Fed Strikes Out! Negative Interest Rates Soon?"

"We're a hair trigger away from negative nominals, not runaway inflation." -Jeff

SPY +240
QQQ +213
GLD +57
TLT -71
USO +43
TYX +30
CPI from 0.1 to 9.1 to 3.0.

Just two short weeks ago: "Our savior genius Jeff warned us this was coming!" Not a single comment giving him praise today.

Laughable.

[IKTGWIW]

Hi Jeff, if QE is not money printing, please do a video to explain how money is printed other than bank lending. In other words, can the government print money? If yes, how does the government print money?

[PaulSharkey-uj]

QE adds liquidity to the market and therefore stocks go up. Stop telling people that QE doesn’t matter. It is everything to the financial system. Like it or not

[peterquin]

Something isn't right here. FEDEX and UPS and trucking are in recession. Dollar stores sales are falling. But yet consumer spending keeps going up every single month!!! The economy has lost over 1 million full-time jobs over the last year and yet spending keeps increasing every month. Credit cards and 401K's do not explain this because the hole from that many jobs is too big. So what's really going on here????

[BEYONDYOURIQ]

Stocks always crash when Fed cuts rates...signals weak economy.

[omrit]

Snyder talking his book, continues to fear monger inspite of everything. Rate cuts incentivize borrowing and business expansion for medium and small companies, reduce debt rollover burden, and help government fiscal spending debt.

[jimmer]

Just anodher perma bear costing people money that dont know any better. History shows if you stay invested in good companys you make mo ey period!

[RichardMoore-jgtl]

I’m 53 and just started my portfolio with around $180K. Slowly trying to create significant passive income and manage my Stock Portfolio. how do I invest to deal with markets ups & downs

[happyhobbit]

"INVENT" is the perfect word for the alleged fed control of inflation through rate changes. You are correct that fed changes to rates don't do a dam thing.

[lqdlqd]

If taking money out of thin air and putting into economy (by increasing FED's balance sheet through buying everything within a sight) is not "money printing" then what is? Eurodollar please explain us the QE.