Fed Delivers First Rate Cut
Easing begins — what comes next
The first rate cut after a hiking cycle is one of the most debated signals in finance. It can mean either 'soft landing achieved' (1995, 2019) or 'recession imminent' (2001, 2007). Context determines outcome.
| Date | 1M return | 1Y return | 5Y return |
|---|---|---|---|
| 1957-11-01 | +2.7% | +26.9% | +42.8% |
| 1968-09-03 | +4.5% | -4.6% | +7.9% |
| 1971-10-01 | -6.2% | +11.5% | +7.1% |
| 1973-10-01 | +1.0% | -41.3% | -5.2% |
| 1979-11-01 | +3.2% | +23.1% | +62.1% |
| 1984-09-04 | -1.5% | +14.0% | +112.2% |
| 1989-06-01 | -1.2% | +12.2% | +41.7% |
| 1998-10-01 | +11.4% | +30.1% | +5.4% |
| 2002-11-01 | +2.2% | +17.5% | +66.7% |
| 2007-08-01 | -0.6% | -13.5% | -5.9% |
| 2019-08-01 | -0.9% | +10.8% | +75.6% |
| 2024-09-03 | +3.3% |
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
Insurance cuts (1995, 1998, 2019) — where the economy is fine but the Fed cuts preemptively — produced strong equity returns. Panic cuts (2001, 2007) — where the economy is already contracting — preceded further declines.
Regardless of whether the cut is insurance or panic, long-duration bonds rally on the first cut. Extending duration before the first cut has been profitable in every cycle since 1980.
If the cut comes because the economy is weakening, equities often fall further after the first cut (2001: -12% over next 6 months; 2007: -25% over next 6 months).
Diagnose the cut before repositioning: an insurance cut into a healthy economy has historically supported stocks, while a cut into visible weakness has preceded further declines. The consistent element is fixed income — extending duration around the first cut has worked in every cycle since 1980 — so consider making the bond move decisive and the equity move conditional.