The Fed’s Third Interest Rate Cut in 2019 — What It Means for You
- Last Wednesday, the Federal Reserve cut interest rates for the third time this year.
- The Fed removed a clause from its post-meetings statement, which could have serious implications for investors in the months ahead.
- Chad Shoop shares his favorite strategy that profits in any market — especially with the coming uncertainty.
Last Wednesday, the Federal Reserve — the central bank in the U.S. — signaled a major shift in its interest rate policy.
We saw this shift in the Fed’s post-meeting press release.
Since June, its quarterly post-meeting statements included a clause that signaled the Fed would “act as appropriate to sustain the expansion.”
But last week, the Fed replaced the word “act” with “assess.”
“Assess” tells us not to expect more rate cuts for the time being. The Fed is ready to sit back and see how the economy does after the latest round of interest rate cuts.
The quarter-point cut last week marks the third cut this year. This has major implications for the stock market going forward.
While investors worry about what that means, I have a strategy for you that will help you crush the stock market — especially with the uncertainty ahead.
A Third Interest Rate Cut Bodes Well for a Continued Bull Market
After the Fed cut rates, I sent out a tweet explaining what a third interest rate cut means.
This is why I remain #bullish. When the #FederalReserve cuts #interestrates three times and pauses, like now if they pause, #stocks rise. It’s a nice stimulus to the economy before things are out of control. More than three is when the bottom falls out. https://t.co/UWhswv8YQo
— Chad Shoop, CMT (@ChadShoopGuru) October 30, 2019
If you haven’t done so already, check out Twitter@chadshoopguru and follow me. I post daily with key news and trends to watch in the market — and I always give you my spin on it.
This topic bodes well for a continued bull market.
Because when the Federal Reserve cuts interest rates three times and pauses, or “assesses,” stocks continue higher.
We’ve only seen the Fed have three consecutive interest rate cuts four times in the last 25 years.
At first glance, the data from past times don’t seem too helpful. But when you look at the circumstances of each past year, a clear trend emerges.
Take a look at the chart below.
As you can see, in 2001 and 2007, more than three rate cuts followed. The economy was also heading into a recession. Those three rate cuts simply weren’t enough.
But in 1996 and 1998, three rate cuts were the sweet spot.
It lifted the slowing economy, much like the one today, and allowed stocks to march even higher. The economy didn’t need any more cuts.
And that’s what we have to watch for going forward.
If the Fed follows with more rate cuts, or if things get worse by December — and warrant more rate cuts — it means the economy is slipping away faster than we expected.
And it would point toward a recession in 2020.
It’s too early to call it yet, and this concern can create a challenging couple of months for investors in the stock market.
But I don’t worry about these big-picture themes when it comes to investing.
I’ll tell you why: It’s all about the strategy.
My No. 1 Strategy Profits in Any Market
While it is fun making bold predictions, such as calling a recession in 2020, I prefer to make money.
The Fed has cut rates three times, and now it’s going to assess the economy.
The last two rate cuts, we saw double-digit rallies in the stock market — as in the chart above.
And the smart money is betting on a continued bull market, despite the uncertainty in the months ahead.
I’m not worried about the challenging months ahead either.
You see, I’m able to make money regardless of what happens by sticking to proven strategies that I’ve tested in all sorts of market environments.
One of my favorite strategies profits from all types of markets. It does even better when uncertainty is high — and that’s what we may see heading into the end of the year.
This strategy has become my go-to strategy for income. By taking a conservative approach, it routinely outperforms the best bullish strategies every year.
And I have great news!
I’m set to release a brand-new trade for this unique strategy tomorrow. Click here to learn more and join my readers on this instantly winning trade.
Chad Shoop, CMT
Editor, Pure Income
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