What Rate Cuts Mean

You know recently I have seen a number of articles posted that mentioned that the stock markets tend to be down, more specifically during the 2000-2002 bear market, during rate cutting campaingns. These posts make it seem that rate cutting campaigns should boost the stock market and everything should be positive because the rate cut is a good thing.

Well, short term, yeah. For the most part the markets celebrate a cut and more so if they think more are coming. But these are short term bounces. Why?

The Fed was able to cut rates because the economy is struggling and needs a boost to get moving. Rates are cut to encourage businesses to borrow money, which stimulates job growth, with stimulates profits, and moves the world forward. It also helped fuel consumer spending by lowering borrowing costs on credit cards, installment loans such as cars, and homes.

Normally the economy has to kind suck, or show definite signs of sucking before the Fed cuts rates. SO if the economy sucks, or shows signs of sucking, equities will suffer. It's natural for it to be that way.

People that argue that equities of falling value shows that rate cuts don't work are just giving you what they want you to hear.

But it is an empty argument. The best response to a comment such as that is....DUH.