Stocks Hit New Highs on Hopes of Fed Rate Cuts Despite Robust Economy
• Stocks are at all-time highs in 2023 after a strong year, partly due to expectations of Fed interest rate cuts in 2024 • Historically, when rates fall, stocks tend to rise as investors move money out of bonds • The previous 3 Fed rate-cut cycles since 2000 coincided with recessions, unlike the current economy • This cycle is more akin to the early 1980s when rates rose to combat inflation, then fell leading stocks to soar • With rate cuts already priced in, the Fed may have to cut more than expected to fuel further stock gains