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Does interest rate cut mean a sharp fall? Historical data goes against intuition!
In history, how did the US stock market perform when the Federal Reserve lowered the Interest Rate after raising it to over 5%?
The recent two are as follows:
One is the 2007-2008 financial crisis, which saw a big dump of 50% after interest rate cuts.
Before the subprime mortgage crisis broke out in 2007, the Federal Reserve raised the Interest Rate to 5.25%. Subsequently, due to the economic recession and the outbreak of the financial crisis, the Federal Reserve began to significantly cut interest rates in September 2007.
After the interest rate cut, the stock market did not immediately recover. Instead, it encountered a serious market crash in 2008, with the Dow Jones index falling by about 50% in one year.
The second is the bursting of the Internet bubble from 2000 to 2003
Before the burst of the internet bubble in 2000, the Federal Reserve raised the Interest Rate to 6.5%, but the stock market kept soaring as people anticipated the internet revolution.
Subsequently, due to economic slowdown and market bubble burst, the Federal Reserve began to cut interest rates in early 2001.
But despite multiple interest rate cuts by the Federal Reserve, the stock market continued to plummet, with the Dow Jones Industrial Average and the Nasdaq Composite Index falling by about 30% and 70% respectively, until hitting bottom in 2002.
Some people may think that the current AI concept in the US stock market is similar to the Internet bubble back then.
Last year we were looking forward to Halving, BTCETF, and rate cuts, but now only rate cuts are left - and they may not be as wonderful.
The good news is, if there is no recession, only interest rate cuts, it shouldn't be so bad, right?
To learn about specific opportunities and decisions, check out the introduction and receive the Position allocation strategy, which teaches you how to make money in the Bull Market and earn coins in the Bear Market.
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