Careful with that. It's all a matter of time horizon. The second rate cut clearly did not stanch the bleeding in 1929, and I think there are other examples throughout history. I can't imagine that there was a single rate cut ever that didn't provoke some kind of positive market response, but you have only to look a week or a month later to see if it produced lasting improvement. There was a sequence of nearly a dozen rate cuts in 1929, and it took years for them to gain traction. Same for the Nikkei.
Based on the market's complete retracement of the rate cut gains in the past week, I'd say it's telling us BubbleBoy is way behind the curve. If you can guess when the next rate cut is coming, I think you'd do well to posture neutral going into the cut, and then deliver a nuclear short strike into a rate cut rally. This was my plan on the last one, but AG even caught me by surprise. Stocks do NOT reach ultimate bottom on the present sentiment, and they do NOT bottom before acceptance of the concept of recession. And I NEVER take a net position that is counter to the long-term trend. Helps me to sleep at night knowing time is always on my side.
I suspect the next rate cut will come at the next meeting, but there could be much damage done before the anticipation rally begins. THE rule is, let the Fed point the way, but wait for signs that the herd is turning. I'm watching now for bullish developments, as the second rate cut is a given, but the market must deliver a healthy response. That hasn't happened, and probably can't, until more poor investment decisions are flushed from the system.
BC |
