Posted 1/31/2024, 2:52:00 AM
Markets Brace for Risk of Crash If Fed Over-Cuts Rates Before Recession
- Investors expect significant Fed rate cuts in 2024, but history shows markets crash if cuts come before a recession
- Fed funds futures point to 5-6 rate cuts in 2024, more than the 3 cuts Fed has projected
- The last time Fed cut rates aggressively without a recession was 1985-1986, followed by 1987's Black Monday crash
- With stocks already extending gains in early 2023, overheating risk is high if Fed over-stimulates
- Fed likely remembers lessons of 1980s and will be cautious on pace of 2024 cuts to avoid crash