A harder rate cut then expected what it means to you?

Well I wasn't expecting that even though most were by the end of it. The fed just cut interest rates by a whopping half a percent which is actully huge and some would say kind of aggressive.

Now the thing I want you to take not of here is the 2007 line in which looks much the same as the one we are currently seeing happening right now. We just cut the rate (Which by the way has not be updated on this chart just yet) but as soon as we did that in 2007 we slipped into a recession and most likely one of the worst ones many generations have seen in a while.

This is when housing blew up, the stock market tanks and legit wiped out everyones savings. It also is when banks and large companies got bailed out by tax payers leaving people worse off and skyrocketing the age of where companies ran the world.

Are we set to repeat this once again? Let's take a bit of a look at how market are reacting so far and try to predict (aka guess) what the next year or two could look like for stocks and for crypto.

So far the stock markets are looking positive towards this news. With most major indexes close to 0.4% higher.

The crypto markets however are a bit of a wild mess. Jumping to 61k for bitcoin and then quickly selling back off under 60.5k in just minutes. I don't think we will get that clear of a picture until end of day trading in 30 minutes or really tomorrow.

Why Did The Fed Lower Rates?
Inflation is still higher than that 2% target. In fact we really should be below that 2% rate and in it for a few years in order to make up for the super high inflation we just saw over the last four years. but that's never going to happen lol

So far this entire process is mimicking what we saw in the 1970's and remember to take a look at that chart above at what happened during that time!

Now one of the reasons for the rate reduction is the fed seeing that inflation has been cooling. at 2.5% that's a far cry from the 9.1% peak we saw. However again if you look at history the fed often changes this rate too soon leading to inflation to rip back and cause all kinds of havoc.

What Does This Lower Rate Do?
For every day people like you and I we will mostly see it in mortgage rates and other loans. However it will take some time for this adjustment to take place. While a half a percent most likely wont get people to jump back into the housing market it is starting to get it to that point. Most people are on 3% rates so jumping to a 6% - 7% rate on your loan for moving is simply stupid and why no one is really moving in the housing market right now.

This reduction and more to come most likely by end of year should take us closer to that 4% mortgage rate in 2025 leading to some real possibilities again in the housing market for people wanting to move.

Investors
History shows us that when the fed starts to reduce rates the stock market often popped off in the positive way. However the silver lining here is that since 2001 when this happened the S&P actully LOST value. This loss in value is a recession taking place which has happened every time. The 2000 dot com bubble, and the 2009 housing crash.

A recession would mean the markets would on average lose 15% which honestly could be what we see happen again being that the stock market has been going higher during all this time, the dollar is under presser and inflation has been crazy.

Now some stocks and investments do better often times when these rate cuts start to kick in.

For example when rates are high bonds are heavily gone after along with silver and gold. When those rates start to fall REITs normally perform very well long with the general overall stock market.

Crypto
So how will this rate cut and others affect bitcoin and other crypto assets?

If we look at overall money value of assets such as gold which has risen over 3 trillion in just 2024 alone and compare that to bitcoin which is only hovering now around 1.1 trillion which kind of shows you just how much potential bitcoin has if it becomes an attractive asset once again and ushers in a real bull market. That same 3 trillion in gold moved to bitcoin would skyrocket the price of a single bitcoin to nearly $150,000!

So what are you thoughts on the rate cut and where markets will head next for stocks or for crypto?