U.S. Money Market Fund Assets vs. Federal Funds Effective Rate U.S. money market funds are sensitive to changes in interest rates, and historical trends indicate that they often experience outflows approximately 12 months after an initial Fed rate cut. Image: Real Investment Advice
S&P 500 Index and Fed Funds Effective Rate While Fed rate cuts typically provide a short-term boost to market sentiment, historical trends suggest they often coincide with economic slowdowns. Image: Real Investment Advice
U.S. Recessions – 6-Month Fed Funds Minus Current Fed Funds Rate Historically, U.S. recessions have often followed periods of bearish short-term interest rates, particularly when the Fed cuts rates in response to economic downturns or signs of slowing growth. Image: BofA Research Investment Committee
U.S. Real Prime Rate The 50bps rate cut helps small businesses by lowering borrowing costs. The Fed’s cut aims to stimulate economic activity and support the growth of these essential companies, which play a crucial role in the overall economy. Image: BofA Global Investment Strategy
S&P 500 TTM YoY EPS vs. Fed Funds Target Traditionally, when the Fed starts cutting interest rates, corporate profits tend to decelerate. However, this’s not the case today, highlighting the unique economic landscape we face. Image: BofA US Equity & Quant Strategy
S&P 500 Returns After Fed Cuts Within 2% of an All-Time High When the S&P 500 is within 2% of an all-time high and the Fed cuts rates, historical data shows that the index has increased 100% of the time over the following 12 months since 1980, with an average return of 13.9%. Image: Carson…
U.S. Fed Funds Target Rate While “panic rate cuts” have historically been associated with negative market outcomes, the current context suggests that Wall Street may be embracing these cuts as necessary adjustments rather than signs of economic distress. Image: BofA Global Investment Strategy
Current Market Pricing for Fed Funds Rate Traders predict that the Federal Reserve’s terminal rate, which marks the end of the rate cut cycle, will be around 3%. Image: BofA Global Investment Strategy
Performance of Gold and Fed Cutting Cycles Federal Reserve interest rate cuts are often perceived as favorable for gold prices, particularly during periods of economic downturn. Image: Goldman Sachs Global Investment Research
Rates and Dollar Forecast BofA expects the Fed to cut rates in September, adjusting its previous expectations. While market expectations for rate cuts have risen, the Fed hasn’t given a clear signal and will rely on data before making a decision. Image: BofA Global Research
Fed Funds Rate Expectations Despite the initial anticipation of multiple rate cuts in 2024 as suggested by the Fed’s “dot plot,” the current market sentiment indicates a more reserved outlook, with fewer rate cuts in 2024. Image: BofA Global Investment Strategy